Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2020 | |
Entity Registrant Name | GDS Holdings Ltd |
Entity Central Index Key | 0001526125 |
Document Type | 6-K |
Document Period End Date | Jun. 30, 2020 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2020 |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||||
Cash | ¥ 7,742,082 | ¥ 5,810,938 | ||
Restricted cash | 112,756 | 34,299 | ||
Accounts receivable, net of allowance for doubtful accounts | 1,388,535 | 879,962 | ||
Value-added-tax ("VAT") recoverable | 114,575 | 129,994 | ||
Prepaid expenses | 104,357 | 80,913 | ||
Other current assets | 155,782 | 148,603 | ||
Total current assets | 9,618,087 | 7,084,709 | ||
Property and equipment, net | 24,542,951 | 19,184,639 | ||
Intangible assets, net | 557,971 | 394,628 | ||
Prepaid land use rights, net | 747,680 | 747,187 | ||
Operating lease right-of-use assets | 1,909,239 | 796,679 | ||
Goodwill | 2,409,325 | 1,905,840 | ||
Deferred tax assets | 136,809 | 72,931 | ||
Restricted cash | 171,705 | 128,025 | ||
VAT recoverable | 1,129,440 | 888,483 | ||
Other non-current assets | 385,643 | 289,410 | ||
Total assets | 41,608,850 | 31,492,531 | ||
Current liabilities | ||||
Short-term borrowings and current portion of long-term borrowings (including RMB254,000 and RMB237,500 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 1,681,787 | 1,137,737 | ||
Accounts payable (including RMB181,448 and RMB243,637 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 2,880,745 | 1,675,966 | ||
Accrued expenses and other payables (including RMB160,401 and RMB199,029 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 1,541,688 | 817,883 | ||
Deferred revenue (including RMB68,003 and RMB52,290 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 59,826 | 90,316 | ||
Operating lease liabilities, current (including RMB31,869 and RMB41,576 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 73,362 | 55,139 | ||
Finance lease and other financing obligations, current (including RMB125,318 and RMB27,339 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 230,746 | 222,473 | ||
Total current liabilities | 6,468,154 | 3,999,514 | ||
Long-term borrowings, excluding current portion (including RMB12,500 and RMB60,000 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 9,337,882 | 8,028,473 | ||
Convertible bonds payable | 2,086,179 | 2,049,654 | ||
Operating lease liabilities, non-current (including RMB66,387 and RMB133,719 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 1,141,835 | 709,998 | ||
Finance lease and other financing obligations, non-current (including RMB921,965 and RMB986,301 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 7,101,401 | 4,751,121 | ||
Deferred tax liabilities (including RMB76,297 and RMB81,302 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 282,266 | 252,672 | ||
Other long-term liabilities (including RMB29,950 and RMB20,496 of VIEs without recourse to the primary beneficiary as of December 31, 2019 and June 30, 2020, respectively) | 298,334 | 345,537 | ||
Total liabilities | 26,716,051 | 20,136,969 | ||
Redeemable preferred shares (US$0.00005 par value; 150,000 shares authorized, issued and outstanding as of December 31, 2019 and June 30, 2020; Redemption value of RMB1,061,981 and RMB1,064,137 as of December 31, 2019 and June 30, 2020, respectively; Liquidation value of RMB1,537,636 and RMB2,378,419 as of December 31, 2019 and June 30, 2020, respectively) | 1,064,137 | 1,061,981 | ||
Shareholders' Equity | ||||
Ordinary shares (US$0.00005 par value; 2,002,000,000 shares authorized; 1,148,842,379 and 1,210,996,227 Class A ordinary shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively; 67,590,336 Class B ordinary shares issued and outstanding as of December 31, 2019 and June 30, 2020) | 434 | 412 | ||
Additional paid-in capital | 16,125,571 | 12,403,043 | ||
Accumulated other comprehensive loss | (47,075) | (52,684) | ||
Accumulated deficit | (2,250,268) | (2,057,190) | ||
Total shareholders' equity | 13,828,662 | 10,293,581 | ¥ 8,419,255 | ¥ 5,521,925 |
Commitments and contingencies | ||||
Total liabilities, redeemable preferred shares and shareholders' equity | ¥ 41,608,850 | ¥ 31,492,531 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) ¥ in Thousands | Jun. 30, 2020CNY (¥)shares | Dec. 31, 2019CNY (¥)shares |
Current liabilities, VIEs | ||
Short-term borrowings and current portion of long-term borrowings | ¥ 1,681,787 | ¥ 1,137,737 |
Accounts payable | 2,880,745 | 1,675,966 |
Accrued expenses and other payables | 1,541,688 | 817,883 |
Deferred revenue | 59,826 | 90,316 |
Operating lease liabilities, current | 73,362 | 55,139 |
Finance lease and other financing obligations, current | 230,746 | 222,473 |
Long-term borrowings, excluding current portion | 9,337,882 | 8,028,473 |
Operating lease liabilities, non-current | 1,141,835 | 709,998 |
Finance lease and other financing obligations, non-current | 7,101,401 | 4,751,121 |
Deferred tax liabilities | 282,266 | 252,672 |
Other long-term liabilities | ¥ 298,334 | ¥ 345,537 |
Ordinary shares | ||
Ordinary shares, shares authorized | shares | 2,002,000,000 | 2,002,000,000 |
Class A | ||
Ordinary shares | ||
Ordinary shares, shares issued | shares | 1,210,996,227 | 1,148,842,379 |
Ordinary shares, shares outstanding | shares | 1,210,996,227 | 1,148,842,379 |
Class B | ||
Ordinary shares | ||
Ordinary shares, shares issued | shares | 67,590,336 | 67,590,336 |
Ordinary shares, shares outstanding | shares | 67,590,336 | 67,590,336 |
Redeemable preferred shares | ||
Redeemable preferred shares | ||
Preferred Stock, Shares Authorized | shares | 150,000 | 150,000 |
Preferred Stock, Shares Issued | shares | 150,000 | 150,000 |
Preferred Stock, Shares Outstanding | shares | 150,000 | 150,000 |
Redemption value | ¥ 1,064,137 | ¥ 1,061,981 |
Liquidation value | 2,378,419 | 1,537,636 |
VIEs | Without recourse to the primary beneficiary | ||
Current liabilities, VIEs | ||
Short-term borrowings and current portion of long-term borrowings | 237,500 | 254,000 |
Accounts payable | 243,637 | 181,448 |
Accrued expenses and other payables | 199,029 | 160,401 |
Deferred revenue | 52,290 | 68,003 |
Operating lease liabilities, current | 41,576 | 31,869 |
Finance lease and other financing obligations, current | 27,339 | 125,318 |
Long-term borrowings, excluding current portion | 60,000 | 12,500 |
Operating lease liabilities, non-current | 133,719 | 66,387 |
Finance lease and other financing obligations, non-current | 986,301 | 921,965 |
Deferred tax liabilities | 81,302 | 76,297 |
Other long-term liabilities | ¥ 20,496 | ¥ 29,950 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Net revenue | ¥ 2,582,623 | ¥ 1,877,030 |
Cost of revenue | (1,871,183) | (1,403,252) |
Gross profit | 711,440 | 473,778 |
Operating expenses | ||
Selling and marketing expenses | (60,060) | (57,637) |
General and administrative expenses | (273,722) | (185,003) |
Research and development expenses | (18,987) | (8,839) |
Income from operations | 358,671 | 222,299 |
Other income (expenses): | ||
Interest income | 7,781 | 25,668 |
Interest expenses | (569,295) | (466,691) |
Foreign currency exchange loss, net | (17,206) | (2,758) |
Government grants | 12,578 | 1,195 |
Gain from purchase price adjustment | 55,154 | |
Others, net | 1,326 | 3,325 |
Loss before income taxes | (150,991) | (216,962) |
Income tax expenses | (42,087) | (12,817) |
Net loss | (193,078) | (229,779) |
Change in redemption value of redeemable preferred shares | (17,760) | |
Cumulative dividend on redeemable preferred shares | (26,667) | (13,472) |
Net loss attributable to ordinary shareholders | ¥ (219,745) | ¥ (261,011) |
Loss per ordinary share | ||
Basic and diluted | ¥ (0.19) | ¥ (0.24) |
Weighted average number of ordinary share outstanding | ||
Basic and diluted | 1,186,168,652 | 1,070,590,091 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Net loss | ¥ (193,078) | ¥ (229,779) |
Other comprehensive income | ||
Foreign currency translation adjustments, net of nil tax | 5,609 | 66,872 |
Comprehensive loss | ¥ (187,469) | ¥ (162,907) |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - CNY (¥) ¥ in Thousands | Ordinary Shares | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total |
Balance at Dec. 31, 2018 | ¥ 341 | ¥ 7,275,945 | ¥ (139,254) | ¥ (1,615,107) | ¥ 5,521,925 |
Balance (in shares) at Dec. 31, 2018 | 1,007,069,643 | ||||
Changes in shareholders' equity | |||||
Loss for the period | (229,779) | (229,779) | |||
Other comprehensive income | 66,872 | 66,872 | |||
Total comprehensive loss | 66,872 | (229,779) | (162,907) | ||
Issuance of ordinary shares | ¥ 37 | 2,982,205 | 2,982,242 | ||
Ordinary shares issued (in shares) | 109,850,744 | ||||
Shares surrendered (in shares) | (6) | ||||
Shares issued to depository bank | ¥ 16 | (16) | |||
Shares issued to depository bank (in shares) | 48,962,896 | ||||
Redeemable preferred shares dividends | (13,472) | (13,472) | |||
Change in redemption value of redeemable preferred shares | (17,760) | (17,760) | |||
Share-based compensation | 62,934 | 62,934 | |||
Exercise of share options | 42,666 | 42,666 | |||
Exercise of share options (in shares) | 8,200,744 | ||||
Settlement of liability-classified restricted share award | 3,627 | 3,627 | |||
Settlement of liability-classified restricted shares award (in shares) | 121,568 | ||||
Settlement of share options and restricted share awards with shares held by depository bank (in shares) | (8,322,312) | ||||
Balance at Jun. 30, 2019 | ¥ 394 | 10,336,129 | (72,382) | (1,844,886) | 8,419,255 |
Balance (in shares) at Jun. 30, 2019 | 1,165,883,277 | ||||
Balance at Dec. 31, 2018 | ¥ 341 | 7,275,945 | (139,254) | (1,615,107) | 5,521,925 |
Balance (in shares) at Dec. 31, 2018 | 1,007,069,643 | ||||
Balance at Dec. 31, 2019 | ¥ 412 | 12,403,043 | (52,684) | (2,057,190) | 10,293,581 |
Balance (in shares) at Dec. 31, 2019 | 1,216,432,715 | ||||
Changes in shareholders' equity | |||||
Loss for the period | (193,078) | (193,078) | |||
Other comprehensive income | 5,609 | 5,609 | |||
Total comprehensive loss | 5,609 | (193,078) | (187,469) | ||
Issuance of ordinary shares | ¥ 22 | 3,533,263 | 3,533,285 | ||
Ordinary shares issued (in shares) | 62,153,848 | ||||
Redeemable preferred shares dividends | (26,667) | (26,667) | |||
Share-based compensation | 133,842 | 133,842 | |||
Exercise of share options | 77,415 | ¥ 77,415 | |||
Exercise of share options (in shares) | 13,960,096 | 13,960,096 | |||
Vesting of restricted shares (in shares) | 3,511,800 | ||||
Settlement of liability-classified restricted share award | 4,675 | ¥ 4,675 | |||
Settlement of liability-classified restricted shares award (in shares) | 100,136 | ||||
Settlement of share options and restricted share awards with shares held by depository bank (in shares) | (17,572,032) | ||||
Balance at Jun. 30, 2020 | ¥ 434 | ¥ 16,125,571 | ¥ (47,075) | ¥ (2,250,268) | ¥ 13,828,662 |
Balance (in shares) at Jun. 30, 2020 | 1,278,586,563 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities: | ||
Net loss | ¥ (193,078) | ¥ (229,779) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Amortization of debt issuance cost and debt discount | 57,135 | 53,512 |
Depreciation and amortization | 709,223 | 523,213 |
Operating lease cost relating to prepaid land use rights | 5,217 | |
Gain on disposal of property and equipment | (587) | (302) |
Share-based compensation expense | 133,842 | 62,934 |
Gain from purchase price adjustment | (55,154) | |
Loss from equity method investment | 2,886 | |
Allowance for doubtful accounts | 319 | 81 |
Deferred tax benefit | (60,264) | (20,852) |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||
Accounts receivable | (427,796) | (318,442) |
VAT recoverable | (149,564) | (148,832) |
Prepaid expenses | (23,318) | (19,626) |
Other current assets | (5,953) | (27,688) |
Other non-current assets | (50,678) | (7,574) |
Accounts payable | 94,492 | 37,142 |
Deferred revenue | (31,195) | 27,823 |
Accrued expenses and other payables | 22,993 | 114,743 |
Other long-term liabilities | 23,094 | 5,231 |
Operating leases | (35,376) | 4,520 |
Net cash provided by operating activities | 16,238 | 56,104 |
Cash flows from investing activities | ||
Payments for purchase of property and equipment and land use rights | (3,564,025) | (1,351,549) |
Cash acquired from the business combinations | 2,349 | |
Cash paid for the business combinations | (320,000) | |
Cash paid for the asset acquisitions | (4,582) | (22,113) |
Cash paid for equity investments | (6,000) | |
Refund of deposits (deposits paid) for potential acquisitions | (15,000) | 1,000 |
Proceeds from sale of property and equipment | 16,422 | 5,069 |
Net cash used in investing activities | (3,884,836) | (1,373,593) |
Cash flows from financing activities: | ||
Proceeds from short-term borrowings | 496,653 | 201,969 |
Proceeds from long-term borrowings | 2,702,543 | 2,741,183 |
Repayment of short-term borrowings | (158,375) | (613,368) |
Repayment of long-term borrowings | (1,196,269) | (1,140,222) |
Payment of issuance cost of borrowings | (55,677) | (119,832) |
Proceeds from exercise of stock options | 77,415 | 43,508 |
Net proceeds from issuance of ordinary shares | 3,560,004 | 2,982,242 |
Net proceeds from issuance of redeemable preferred shares | 989,349 | |
Payment of redeemable preferred shares dividends | (40,068) | (11,458) |
Payment under finance lease and other financing obligations | (78,888) | (196,310) |
Proceeds from other financing arrangements | 621,162 | |
Deferred payments for purchase of property and equipment | (34,432) | |
Payment of contingent consideration for the acquisition of subsidiaries | (21,676) | (107,684) |
Net cash provided by financing activities | 5,872,392 | 4,769,377 |
Effect of exchange rate changes on cash and restricted cash | 49,487 | 113,320 |
Net increase in cash and restricted cash | 2,053,281 | 3,565,208 |
Cash and restricted cash at beginning of period | 5,973,262 | 2,284,748 |
Cash and restricted cash at end of period | 8,026,543 | 5,849,956 |
Supplemental disclosures of cash flow information | ||
Interest paid | 488,256 | 383,423 |
Income tax paid | 71,097 | 8,175 |
Supplemental disclosures of non-cash investing and financing activities | ||
Changes in consideration payable for the acquisition of subsidiaries | 561,926 | 10,000 |
Settlement of liability-classified restricted share award | ¥ 4,675 | ¥ 3,627 |
DESCRIPTION OF BUSINESS AND BAS
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2020 | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (a) Description of business GDS Holdings Limited (the “Parent” or “GDS Holdings”) was incorporated in the Cayman Islands on December 1, 2006. GDS Holdings and its consolidated subsidiaries and consolidated variable interest entities (collectively referred to as the “Company”) are principally engaged in providing colocation, managed hosting and managed cloud services in the People’s Republic of China (the “PRC” excluding Taiwan, the Hong Kong Special Administrative Region (the “Hong Kong SAR”) and the Macau Special Administrative Region for the purposes of these consolidated financial statements only) and Hong Kong SAR. The Company operates its data centers in Hong Kong SAR, Shanghai Municipality, Beijing Municipality, Jiangsu Province, Guangdong Province, Sichuan Province, Hebei Province and Inner Mongolia of the PRC and serves customers that primarily operate in the cloud, internet and banking industries. (b) Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”). The consolidated financial statements are presented in Renminbi (“RMB”), rounded to the nearest thousand. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles of Consolidation The accompanying consolidated financial statements include the financial statements of GDS Holdings, its subsidiaries and consolidated variable interest entities and variable interest entities' subsidiaries for which the Company is the primary beneficiary. In certain regions of the PRC, the Company's operations are conducted through Shanghai Xinwan Enterprise Management Co., Ltd. ("Management HoldCo"), Beijing Wanguo Chang’an Science and Technology Co., Ltd. (“GDS Beijing"), GDS Beijing's subsidiaries and Shanghai Shu’an Data Services Co., Ltd. (“GDS Shanghai") (referred to as the “VIEs”) to comply with the PRC laws and regulations, which prohibit foreign investments in companies that are engaged in data center related business in those regions. Individuals acting as nominee equity holders ultimately hold the legal equity interests of the VIEs on behalf of the Company. The equity holders of GDS Beijing and GDS Shanghai were William Wei Huang, CEO of the Company, and his relative. In order to enhance corporate governance and facilitate administration of the VIEs, in December 2019, GDS Holdings completed transfer of ownership of the 100% equity interest of GDS Beijing and GDS Shanghai from William Wei Huang and his relative to a newly established holding company, Management HoldCo. The entire equity interest in Management HoldCo is held by a number of management personnel designated by the Board of Directors of GDS Holdings. In conjunction with the transfer of legal ownership, GDS (Shanghai) Investment Co., Ltd. ("GDS Investment Company"), a subsidiary of GDS Holdings, entered into a series of contractual arrangements with Management HoldCo, its shareholders, GDS Beijing and GDS Shanghai to replace the previous contractual arrangements with GDS Beijing and GDS Shanghai on substantially the same terms under such previous contractual arrangements. The previous contractual arrangements were terminated simultaneously when the current contractual arrangements came into effect, and the subsidiary of GDS Holdings under the previous and current contractual arrangements is the same entity, namely GDS Investment Company. GDS Holdings also replaced the sole director of GDS Shanghai and certain subsidiaries of GDS Beijing with a board of three directors. William Wei Huang acts as the Chairman of the board of directors of Management HoldCo, GDS Investment Company, GDS Beijing and GDS Shanghai and their subsidiaries respectively. Other management members of GDS and board appointee serve as directors and officers of Management HoldCo., GDS Investment Company, GDS Beijing and GDS Shanghai and their subsidiaries. This restructuring could reduce risk by allocating ownership of the VIEs among a larger number of individual management shareholders, and strengthen corporate governance with the establishment of the board of directors in the VIEs and its subsidiaries. This restructuring could also create a more stable ownership structure by avoiding reliance on a single or small number of natural persons, and by buffering the ownership of the VIEs with an additional layer of legal entities, creating an institutional structure that is tied to the Company's management philosophy and culture. VIE Agreements were entered into among GDS Beijing, GDS Shanghai, Management HoldCo, its shareholders and GDS Investment Company. The following is a summary of the contractual VIE Agreements entered among GDS Investment Company, GDS Beijing, GDS Shanghai, Management HoldCo and its shareholders. Equity Interest Pledge Agreements. Shareholder Voting Rights Proxy Agreements. Exclusive Technology License and Service Agreements. Intellectual Property Rights License Agreements. GDS Shanghai. This agreement can only be early terminated by prior mutual consent of the parties and need to be renewed upon GDS Investment Company's unilateral request. Exclusive Call Option Agreements. Loan Agreements. thirty Under the terms of the VIE Agreements, the Company has (i) the right to receive service fees on a yearly basis at an amount equivalent to all of the net profits of the VIEs under the exclusive technology license and services agreements when such services are provided; (ii) the right to receive all dividends declared by the VIEs and the right to all undistributed earnings of the VIEs; (iii) the right to receive the residual benefits of the VIEs through its exclusive option to acquire 100% of the equity interests in the VIEs, to the extent permitted under PRC law; and (iv) the right to require each of the shareholder of the VIEs to appoint the PRC citizen(s) as designated by GDS Investment Company to act as such shareholder 's exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of the VIEs requiring shareholder approval, disposing of all or part of the shareholder 's equity interest in the VIEs, and appointing directors and executive officers. In accordance with Accounting Standards Codification (“ASC”) 810-10-25-38A, the Company has a controlling financial interest in the VIEs because the Company has (i) the power to direct activities of the VIEs that most significantly impact the economic performance of the VIEs; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIEs that could potentially be significant to the VIEs. The terms of the VIE Agreements and the Company’s financial support to the VIEs were considered in determining that the Company is the primary beneficiary of the VIEs. Accordingly, the financial statements of the VIEs are consolidated in the Company’s consolidated financial statements. Under the terms of the VIE Agreements, the VIEs’ equity holders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Company. All of the equity (net assets) or deficits (net liabilities) and net income (loss) of the VIEs are attributed to the Company. The Company has been advised by its PRC legal counsel that each of the VIE agreements is valid, binding and enforceable in accordance with its terms and applicable PRC laws and the ownership structure of the VIEs does not violate applicable PRC Laws. However, there are substantial uncertainties regarding the interpretation and application of PRC laws and future PRC laws and regulations. There can be no assurance that the PRC authorities will take a view that is not contrary to or otherwise different. If the current ownership structure of the Company and the VIE Agreements are determined to be in violation of any existing or future PRC laws and regulations, the PRC government could: ● Levy fines on the Company or confiscate income of the Company; ● Revoke or suspend the VIEs' business or operating licenses; ● Discontinue or place restrictions or onerous conditions on VIE's operations; ● Require the Company to discontinue their operations in the PRC; ● Require the Company to undergo a costly and disruptive restructuring; ● Take other regulatory or enforcement actions that could be harmful to the Company's business. The imposition of any of these government actions could result in the termination of the VIE agreements, which would result in the Company losing the (i) ability to direct the activities of the VIEs and (ii) rights to receive substantially all the economic benefits and residual returns from the VIEs and thus result in the deconsolidation of the VIEs in the Company's consolidated financial statements. The following tables set forth the financial statement balances and amounts of the VIEs and their subsidiaries included in the consolidated financial statements after the elimination of intercompany balances and transactions among VIEs and their subsidiaries, including the liabilities with recourse to the primary beneficiary, which represented the borrowings guaranteed by GDS Holdings. As of December 31, 2019 June 30, 2020 Assets Current assets Cash 730,960 888,353 Accounts receivable, net of allowance for doubtful accounts 858,764 1,278,630 VAT recoverable 46,817 45,870 Prepaid expenses 39,124 55,175 Other current assets 32,929 45,152 Total current assets 1,708,594 2,313,180 Property and equipment, net 2,911,727 2,834,443 Intangible assets, net 159,860 149,278 Operating lease right-of-use assets 91,329 169,556 Deferred tax assets 34,157 39,486 Restricted cash 29,508 49,987 VAT recoverable 136,011 123,264 Other non-current assets 75,873 98,761 Total assets 5,147,059 5,777,955 Liabilities Current liabilities Short-term borrowings and current portion of long-term borrowings 493,614 536,023 Accounts payable 181,448 243,637 Accrued expenses and other payables 160,401 199,029 Deferred revenue 68,003 52,290 Operating lease liabilities, current 31,869 41,576 Finance lease and other financing obligations, current 125,318 27,339 Total current third-party liabilities 1,060,653 1,099,894 Long-term borrowings, excluding current portion 1,335,084 1,289,454 Operating lease liabilities, non-current 66,387 133,719 Finance lease and other financing obligations, non-current 921,965 986,301 Deferred tax liabilities 76,297 81,302 Other long-term liabilities 29,950 20,496 Total third-party liabilities 3,490,336 3,611,166 Amounts due to GDS Holdings and its non-VIE subsidiaries, net 1,534,768 1,957,479 Total liabilities 5,025,104 5,568,645 As of December 31, 2019 and June 30, 2020, accounts receivable of RMB83,468 and RMB85,870, respectively, and property and equipment of RMB114,344 and RMB150,800, respectively, of VIEs were pledged solely to secure banking borrowings of VIEs. Net revenue, net income, operating, investing and financing cash flows of the VIEs that were included in the Company’s consolidated financial statements for the six-month periods ended June 30, 2019 and 2020 are as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Net revenue 1,837,452 2,489,175 Net income 7,036 87,354 Net cash provided by operating activities 24,371 261,379 Net cash used in investing activities (91,297) (68,734) Net cash used in financing activities (4,790) (14,773) The unrecognized revenue producing assets that are held by the VIEs comprise of internally developed software, intellectual property and trademarks which were not recorded on the Company’s consolidated balance sheets as they do not meet all the capitalization criteria. Costs recognized by the VIEs for outsourcing and other services provided by other entities within the Company were RMB921,386 (unaudited) and RMB1,319,663, respectively for the six-month periods ended June 30, 2019 and 2020, net of the services provided to other entities within the Company. These inter-company transactions are eliminated in the consolidated financial statements. (b) Use of estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of long-lived assets, the fair values of assets acquired and liabilities assumed and the consideration transferred in a business combination, the fair value of the reporting unit for the goodwill impairment test, the allowance for doubtful accounts receivable, the valuation of derivatives, the realization of deferred income tax assets, the fair value of share-based compensation awards, the recoverability of long-lived assets, valuation of right-of-use assets and the fair value of the asset retirement obligation. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements. (c) Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company does not have any cash equivalents as of December 31, 2019 and June 30, 2020. (d) Restricted cash Restricted cash represents amounts held by banks, which are not available for the Company’s use, as security for bank borrowings, related interests and certain special capital expenditures. Upon repayment of bank borrowings and the related interests, the deposits are released by the bank and available for general use by the Company. (e) Fair value of financial instruments The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels (Note 16 to the consolidated financial statements): ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. (f) Contract balances The timing of revenue recognition, billings and cash collections result in accounts receivable, contract assets and contract liabilities (i.e. deferred revenue). Accounts receivable are recorded at the invoice amount, net of an allowance for doubtful account and is recognized in the period when the Company has transferred products or provided services to its customers and when its right to consideration is unconditional. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. Prior to the adoption of ASC 326, Financial Instruments – Credit Loss A contract asset exists when the Company has transferred products or provided services to its customers but customer payment is contingent upon satisfaction of additional performance obligations. Contract assets are recorded in other current assets and other assets in the consolidated balance sheet. Deferred revenue (a contract liability) is recognized when the Company has an unconditional right to a payment before it transfers goods or services to customers. (g) Equity Method Investments The Company’s investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control are generally accounted for under the equity method of accounting, as the Company concluded it does not have control, but has the ability to exercise significant influence over the investees. Equity method investments are initially measured at cost, and are subsequently adjusted for cash contributions, distributions and the Company’s share of the income and losses of the investees. The Company records its equity method investment in other non-current assets in the consolidated balance sheet. The Company’s proportionate share of the income or loss from its equity method investment are recorded in others, net in the consolidated statement of operations. The Company reviews its investment periodically to determine if any investment may be impaired considering both qualitative and quantitative factors that may have a significant impact on the investees’ fair value. The Company did not record any impairment charges related to its equity method investment for the six-month periods ended June 30, 2019 and 2020. Equity method investment is recorded in other non-current assets on the consolidated balance sheets. (h) Property and equipment Property and equipment are carried at cost less accumulated depreciation and any recorded impairment. Property and equipment acquired under finance leases are initially recorded at the present value of minimum lease payments. Gains or losses arising from the disposal of an item of property and equipment are determined based on the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of disposal. The estimated useful lives are presented below. Land Remaining lease terms Buildings Shorter of the lease term and 30 years Data center equipment - Machinery 10 - 20 years - Other equipment 3 - 5 years Leasehold improvement Shorter of the lease term and the estimated useful lives of the assets Furniture and office equipment 3 - 5 years Vehicles 5 years Construction in progress primarily consists of the cost of data center buildings and the related construction expenditures that are required to prepare the data center buildings for their intended use. No depreciation is provided in respect of construction in progress until it is substantially completed and ready for its intended use. Once a data center building is ready for its intended use and becomes operational, construction in progress is transferred to the respective category of property and equipment and is depreciated over the estimated useful life of the underlying assets. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets. For assets acquired under a finance lease, the assets are amortized in a manner consistent with the Company’s normal depreciation policy for owned assets if the lease transfers ownership to the Company by the end of the lease term or contains a bargain-purchase-option. Otherwise, assets acquired under a finance lease are amortized over the lease term. (i) Long-lived assets held for sale Long-lived assets are classified as held-for-sale if: (1) the Company has committed to a plan to sell the assets that are available for sale in its present condition, including initiating actions to complete the sale that is probable to qualify for as a completed sale within one year; (2) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn; (3) the assets are being marketed for sale at a price that is reasonable in related to its current value. Long-lived assets held for sale are recorded at the lower of carrying value and fair value less cost to sell. A loss shall be recognized for any initial or subsequent write-down to fair-value less cost to sell. Long-lived assets held for sale are not depreciated while classified as held for sale. (j) Leases The Company is a lessee in several non-cancellable operating leases and finance leases, primarily for data centers, lands, offices and other equipment. The Company adopted ASC 842 on January 1, 2019, using a modified retrospective method. The Company determines if an arrangement is or contains a lease at its inception. The Company recognizes lease liabilities and right-of-use (“ROU”) assets at lease commencement date. Lease liabilities are initially and subsequently measured at the present value of unpaid lease payments at the lease commencement date and is subsequently measured at amortized cost using the effective-interest method. Since most of the Company’s leases do not provide an implicit rate, the Company uses its own incremental borrowing rate on a collateralized basis in determining the present value of unpaid lease payments. ROU assets are initially measured at cost, which consist of (i) initial measurement of the lease liability; (ii) lease payments made to the lessor at or before the commencement date less any lease incentives received; and (iii) initial direct costs incurred by the Company. Variable lease payments are excluded from the measurement of ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. For operating leases, the Company recognizes a single lease cost on a straight-line basis over the remaining lease term. For finance leases, the ROU assets are subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term. Amortization of the ROU assets are recognized and presented separately from interest expense on the lease liability. ROU assets for operating and finance leases are periodically reduced by impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment – Overall Prior to the adoption of ASC 842, Leases The Company has elected not to recognize ROU assets and lease liabilities for short-term leases (i.e. leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise). The Company records an asset and related financing obligation for the estimated construction costs under build-to-suit lease arrangements where it controls the asset during construction. Upon completion of the construction and commencement of the lease terms, the Company assesses whether these arrangements qualify for sales recognition under the deemed sale-leaseback transaction. If the arrangements do not qualify for sales recognition under the sale-leaseback accounting guidance, the Company continues to be the deemed owner of the build-to-suit assets for financial reporting purposes. The Company keeps the construction costs of the assets on its balance sheet. In addition, lease payments less the portion considered to be interest expense decrease the financing liability. If a lease is modified and that modification is not accounted for as a separate contract, the classification of the lease is reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date. (k) Asset retirement costs The Company’s asset retirement obligations are primarily related to its data center buildings, of which the majority are leased under long-term arrangements, and, in certain cases, are required to be returned to the landlords in their original condition. The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred. The corresponding asset retirement costs are capitalized as part of the cost of leasehold improvements and are depreciated over the shorter of the asset or the term of the lease subsequent to the initial measurement. The Company accretes the liability in relation to the asset retirement obligations over time and the accretion expense is recorded in cost of revenue. Asset retirement obligations are recorded in other long-term liabilities. The following table summarizes the activity of the asset retirement obligation liability: Asset retirement obligations as of December 31, 2019 52,441 Additions 8,438 Accretion expense 1,840 Asset retirement obligations as of June 30, 2020 62,719 (l) Intangible assets Intangible assets acquired in the acquisitions comprised of customer relationships and licenses. The weighted-average amortization period by major intangible asset class is as follows: Customer relationships 5-15 years Licenses 20 years Customer relationships represent the orders, backlog and customer lists, which arise from contractual rights or through means other than contracts. Customer relationships are amortized using a straight-line method, as the pattern in which the economic benefits of the intangible assets are consumed or used up cannot be reliably determined. The amortization period of customer relationships is determined based on the remaining contractual period of the contracts with the customers at the time of acquisition and an estimate of the contract renewal period. Licenses are amortized using a straight-line method over the estimated beneficial period. The amortization period of licenses is determined based on the terms of those licenses. (m) Prepaid land use rights The land use rights represent the amounts paid and relevant costs incurred for the rights to use land in the PRC and Hong Kong SAR acquired before the adoption of ASC 842, and are carried at cost less accumulated amortization. Amortization is provided on a straight-line basis over the remaining terms of the land use right ranging from 27 to 42 years. (n) Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in the acquisition that are not individually identified and separately recognized. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the stock prices, business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgment, including the identification of the reporting unit, assignment of assets and liabilities to the reporting unit, assignment of goodwill to the reporting unit, and determination of the fair value of each reporting unit. The Company has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value prior to performing the goodwill impairment test. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the goodwill impairment test is not required. If the goodwill impairment test is required, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. In assessing the qualitative factors, the Group considered the impact of key factors such as changes in the general economic conditions including the impact of COVID-19, changes in industry and competitive environment, stock price, actual revenue performance compared to previous years, and cash flow generation. Based on the results of the qualitative assessment completed as of June 30, 2020, there were no indicators of impairment. Therefore, no impairment charge was recognized for the six-month period ended June 30, 2020. (o) Impairment of long-lived assets Long-lived assets (primarily including property and equipment, operating lease right-of-use assets and prepaid land use rights) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived assets or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. For the purposes of impairment testing of long-lived assets, the Company has concluded that an individual data center is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When there were circumstances that require a long-lived asset or asset group for certain data centers be tested for possible impairment, the Company compared undiscounted cash flows generated by that asset or asset group to its carrying amount. As a result of the test, the carrying amount of the long-lived assets or asset group is recoverable on an undiscounted cash flow basis. Accordingly, no impairment losses were recorded for long-lived assets for the six-month period ended June 30, 2020. (p) Value-added-tax (“VAT”) Entities that are VAT general taxpayers are permitted to offset qualified input VAT paid to suppliers against their output VAT upon receipt of appropriate supplier VAT invoices on an entity by entity basis. When the output VAT exceeds the input VAT, the difference is remitted to tax authorities, usually on a monthly basis; whereas when the input VAT exceeds the output VAT, the difference is treated as VAT recoverable which can be carried forward indefinitely to offset future net VAT payables. VAT related to purchases and sales which have not been settled at the balance sheet date is disclosed separately as an asset and liability, respectively, in the consolidated balance sheets. As of December 31, 2019 and June 30, 2020, the Company recorded a VAT recoverable of RMB129,994 and RMB114,575 in current assets, and RRMB888,483 and RMB1,129,440 in non-current assets, respectively. The Company also recorded VAT payables of RMB7,886 and RMB16,663 in accrued expenses and other payables, respectively, in the consolidated balance sheets as of December 31, 2019 and June 30, 2020. (q) Derivative financial instruments Derivative financial instruments are recognized initially at fair value. At the end of each reporting period, the fair value is remeasured. The gain or loss on remeasurement to fair value is recognized immediately in profit or loss. The Company entered into interest rate swap and foreign currency forward contracts primarily for the purpose to manage the interest rate risk for the long-term borrowings. The Company has elected not to apply hedge accounting to these derivative instruments and recognized all derivatives on the Company’s consolidated balance sheets at fair value. The Company estimates the fair value of its interest rate swap and foreign currency forward contracts using a pricing model based on market observable inputs. Fair value gains or losses associated with interest rate swap and foreign currency forward contracts are recorded within interest expenses and foreign exchange gain (loss) in the Company’s consolidated statements of operations. Cash received or paid for realized gains or losses associated with interest rate swap and foreign currency forward contracts are included in operating cash flows in the consolidated statements of cash flows. For further information on derivative financial instruments, see Note 15 below. (r) Commitment and contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. (s) Revenue recognition The Company recognizes revenue as the Company satisfies a performance obligation by transferring control over a good or service to a customer. For each performance obligation satisfied over time, the Company recognizes revenue over time by measuring the progress toward complete satisfaction of that performance obligation. If the Company does not satisfy a performance obligation over time, the performance obligation is satisfied at a po |
CASH AND RESTRICTED CASH
CASH AND RESTRICTED CASH | 6 Months Ended |
Jun. 30, 2020 | |
CASH AND RESTRICTED CASH | 3 CASH AND RESTRICTED CASH A reconciliation of cash and restricted cash in the consolidated balance sheets to the amounts in the consolidated statements of cash flows is as follows: As of December 31, June 30, 2019 2020 Cash 5,810,938 7,742,082 Restricted cash - current assets 34,299 112,756 Restricted cash - non-current assets 128,025 171,705 Total cash and restricted cash shown in the consolidated statements of cash flows 5,973,262 8,026,543 Restricted cash was mainly for the purpose of securing the repayment of long-term bank borrowings and related interests and certain specific capital expenditure. |
CONTRACT BALANCES
CONTRACT BALANCES | 6 Months Ended |
Jun. 30, 2020 | |
CONTRACT BALANCES | |
CONTRACT BALANCES | 4 CONTRACT BALANCES Accounts Receivable, Net Accounts receivable, net consisted of the following: As of December 31, June 30, 2019 2020 Accounts receivable 881,177 1,388,987 Less: allowance for doubtful accounts (133) (452) Accounts receivable, net 881,044 1,388,535 Including: - Current portion 879,962 1,388,535 - Non-current portion 1,082 — As of December 31, 2019 and June 30, 2020, the accounts receivable expected to be received after one year amounted to RMB1,082 and nil were recorded in other non-current assets in the consolidated balance sheet, respectively. Accounts receivable of RMB520,382 and RMB949,474 was pledged as security for bank loans (Note 9) as of December 31, 2019 and June 30, 2020, respectively. Accounts receivable of RMB115,349 was pledged as security for finance lease and other financing obligations (Note 12) as of June 30, 2020. The following table presents the movement of the allowance for doubtful accounts: Six-month periods ended June 30, 2019 2020 (unaudited) Balance at the beginning of the period 241 133 Allowance made during the period 81 319 Balance at the end of the period 322 452 During the six-month periods ended June 30, 2019 and 2020, the Company made an allowance on accounts receivable of RMB81 (unaudited) and RMB319, respectively. Deferred Revenue The opening and closing balances of the Company’s deferred revenue are as following: Deferred revenue Beginning balance as of January 1, 2020 105,735 Decrease (31,044) Closing balance as of June 30, 2020 74,691 The difference between the opening and closing balances of the Company's deferred revenue primarily results from the timing difference between the satisfaction of the Company's performance obligation and the customer's payment. As of December 31, 2019 and June 30, 2020, the deferred revenue expected to be recognized as revenue after one year amounted to RMB15,419 and RMB14,865, respectively, were recorded in other long-term liabilities in the consolidated balance sheet. The amounts of revenue recognized during the six-month periods ended June 30, 2019 and 2020 from the respective opening deferred revenue balance of the period was RMB61,696 (unaudited) and RMB77,366, respectively. Remaining performance obligations The Company elected to apply the practical expedient that allows the Company not to disclose the remaining performance obligations for variable considerations. This includes usage-based contracts for certain colocation and managed hosting services. As of June 30, 2020, approximately RMB1,296,829 of total revenues and deferred revenues are expected to be recognized in future periods, the majority of which will be recognized over the next three years. |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 6 Months Ended |
Jun. 30, 2020 | |
PROPERTY AND EQUIPMENT, NET | 5 PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following: As of December 31, 2019 June 30, 2020 At cost: Land 855,310 877,640 Buildings 5,964,048 8,198,521 Data center equipment 5,567,606 8,322,958 Leasehold improvement 6,111,733 6,955,273 Furniture and office equipment 61,974 74,858 Vehicles 4,115 4,141 18,564,786 24,433,391 Less: Accumulated depreciation (2,580,320) (3,267,380) 15,984,466 21,166,011 Construction in progress 3,200,173 3,376,940 Property and equipment, net 19,184,639 24,542,951 (1) The carrying amounts of the Company’s property and equipment acquired under finance leases and other financing arrangement were RMB6,070,349 and RMB7,764,891 as of December 31, 2019 and June 30, 2020, respectively. (2) Depreciation of property and equipment (including assets acquired under finance leases and other financing arrangement) was RMB481,288 (unaudited) and RMB668,067 for the six-month periods ended June 30, 2019 and 2020, respectively, and included in the following captions: Six-month periods ended June 30, 2019 2020 (unaudited) Cost of revenue 476,361 631,329 General and administrative expenses 4,405 35,207 Research and development expenses 522 1,531 481,288 668,067 (3) Property and equipment with net a book value of RMB2,493,872 and RMB3,987,569 was pledged as security for bank loans (Note 9) and other financing obligations (Note 12) as of December 31, 2019 and June 30, 2020, respectively. (4) As of December 31, 2019 and June 30, 2020, payables for purchase of property and equipment that are contractually due beyond one year of RMB231,458 and RMB185,310, respectively, are recorded in other long-term liabilities in the consolidated balance sheets. |
INTANGIBLE ASSETS, NET
INTANGIBLE ASSETS, NET | 6 Months Ended |
Jun. 30, 2020 | |
INTANGIBLE ASSETS, NET | 6 INTANGIBLE ASSETS, NET Intangible assets consisted of the following: As of Note December 31, 2019 June 30, 2020 Customer relationships 8 547,322 693,500 Licenses 6,000 6,000 553,322 699,500 Less: accumulated amortization (158,694) (141,529) Intangible assets, net 394,628 557,971 The Company's customer relationships were acquired in business combinations (Note 8). Amortization of intangible assets was RMB28,963 (unaudited) and RMB27,657, respectively for the six-month periods ended June 30, 2019 and 2020. Estimated future amortization expense related to these intangible assets is as follows: Twelve-month periods ending June 30, 2021 76,864 2022 76,924 2023 76,782 2024 71,516 2025 65,814 Thereafter 190,071 Total 557,971 |
PREPAID LAND USE RIGHTS
PREPAID LAND USE RIGHTS | 6 Months Ended |
Jun. 30, 2020 | |
PREPAID LAND USE RIGHTS | 7 PREPAID LAND USE RIGHTS Prepaid land use rights, representing the amounts paid and relevant costs incurred for the rights to use land in the PRC and Hong Kong SAR acquired before the adoption of ASC 842, consisted of the following: As of December 31, June 30, 2019 2020 Prepaid land use rights 782,319 797,134 Less: Accumulated amortization (35,132) (49,454) Prepaid land use rights, net 747,187 747,680 Amortization of prepaid land use rights was RMB12,962 (unaudited) and RMB13,499 for the six-month periods ended June 30, 2019 and 2020, respectively. Prepaid land use rights with a net book value of RMB741,032 and RMB734,566 were pledged as security for bank loans (Note 9) as of December 31, 2019 and June 30, 2020, respectively. Upon the adoption of ASC 842 on January 1, 2019, land use rights acquired are assessed in accordance with ASC 842 and recognized in operating lease right-of-use assets if they meet the definition of operating lease, or property and equipment if they meet the definition of finance lease (Note (2)(j)). |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 6 Months Ended |
Jun. 30, 2020 | |
BUSINESS COMBINATIONS | 8 BUSINESS COMBINATIONS The movement of goodwill is set out as below: As of June 30, 2020 Balance at the beginning of the period 1,905,840 Addition during the period 503,485 Balance at end of period 2,409,325 Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in the acquisition. The goodwill is not deductible for tax purposes. Goodwill is assigned to the design, build-out and operation of data centers reporting unit. Beijing 10, Beijing 11 and Beijing 12 Acquisition On June 5, 2020, the Company consummated an acquisition of all equity interests in a target group from third parties for an aggregate cash consideration of RMB847,586 (including contingent considerations of RMB130,720). As of the acquisition date, the Company estimated that, pursuant to the share purchase agreement, all specified conditions would be met and the Company would be obligated to settle full amount of the purchase price of RMB847,586. As of June 30, 2020, the fair value of remaining consideration payable was RMB527,586, which was recorded in other payables. The payment schedule of remaining consideration is based on the milestone related to the achievement of all specified conditions. The target group owns three data center projects (“Beijing 10, Beijing 11 and Beijing 12”) in Beijing, China. The identifiable assets acquired and liabilities assumed in the business combination were recorded at their fair value on the acquisition date and consisted of the following major items. Note Fair value of consideration 847,586 Effective settlement of pre-existing relationship upon consolidation (i) 34,477 Recognized amounts of identifiable assets acquired and liabilities assumed: Cash (2,349) Accounts receivable (81,027) Property and equipment (ii) (1,971,432) Operating lease ROU assets (94,821) Identifiable intangible assets (iii) (191,000) Other assets (149,956) Accounts payable 727,043 Finance lease and other financing obligations, current 171,979 Operating lease liabilities, current 6,092 Finance lease and other financing obligations, non-current 1,062,114 Operating lease liabilities, non-current 92,360 Deferred tax liabilities 13,833 Other liabilities 38,586 Total identifiable net assets (378,578) Goodwill (iv) 503,485 Note (i):Prior to the acquisition, the Company had receivables from the target group of RMB34,477, which was effectively settled upon completion of the acquisition. Note (ii):Property and equipment acquired included properties acquired under finance lease of RMB632,427. Note (iii):Identifiable intangible assets acquired consisted of customer relationships of RMB191,000 with an estimated useful life of 7.6 years. Note (iv):Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in the acquisition. Goodwill is assigned to the design, build-out and operation of data centers reporting unit. Goodwill primarily represents the expected synergies from combining operations of the target group with those of the Company and intangible assets that do not qualify for separate recognition and is not deductible for tax purposes. In accordance with ASC 350, goodwill is not amortized but is tested for impairment. The amounts of net revenue and net profit of the target group included in the Company’s consolidated statements of operations from the acquisition date to June 30, 2020 amounted to RMB28,850 and RMB582, respectively. Supplemental pro forma financial information as if the acquisitions had occurred as of the earliest date presented has not been provided as the acquisitions are not material to the Company’s results of operations in the six-month period ended June 30, 2020. Guangzhou 3 Acquisition On May 2, 2018, the Company consummated an acquisition of all equity interests in a target group comprising onshore and offshore entities from third parties for an aggregate cash consideration of RMB262,244 (including contingent considerations of RMB245,244). As of the acquisition date, the Company estimated that, pursuant to the share purchase agreement, all specified conditions would be met and the Company would be obligated to settle full amount of the purchase price of RMB262,244. As of December 31, 2019, the fair value of remaining consideration payable was RMB118,336, of which RMB95,274 and RMB23,062 were recorded in other payables and other long-term liabilities, respectively. Pursuant to a supplemental agreement entered into between the seller and the Company in May 2020, both parties agreed to reduce the total cash consideration (including contingent consideration) from RMB262,244 to RMB207,310, subject to the achievement of the revised conditions as set out in the supplemental agreement. The adjustment of the cash consideration of RMB55,154 was recognized as gain from purchase price adjustment in the consolidated statement of operations for the six-month period ended June 30, 2020. As of June 30, 2020, the fair value of remaining consideration payable was RMB51,067, of which RMB31,412 and RMB19,655 were recorded in other payables and other long-term liabilities, respectively. The payment schedule of remaining consideration is based on the milestone related to the achievement of all specified conditions. Asset acquisitions In the six-month period ended June 30, 2020, the Company consummated several acquisitions of certain target entities for total cash considerations (net of the cash acquired) of RMB36,952. These acquisitions did not meet the definition of a business as of the acquisition date in accordance with ASC 805, Business Combinations |
LOANS AND BORROWINGS
LOANS AND BORROWINGS | 6 Months Ended |
Jun. 30, 2020 | |
LOANS AND BORROWINGS | 9 LOANS AND BORROWINGS The Company’s borrowings consisted of the following: As of December 31, June 30, 2019 2020 Short-term borrowings 397,213 734,208 Current portion of long-term borrowings 740,524 947,579 Sub-total 1,137,737 1,681,787 Long-term borrowings, excluding current portion 8,028,473 9,337,882 Total loans and borrowings 9,166,210 11,019,669 Short-term borrowings The Company’s short-term borrowings consisted of the following: As of December 31, June 30, 2019 2020 Unsecured short-term borrowings 80,000 70,000 Secured short-term borrowings 317,213 664,208 397,213 734,208 Short-term borrowings were secured by the following assets: As of December 31, 2019 June 30, 2020 Accounts receivable (Note) 11,535 37,782 The weighted average interest rates of short-term borrowings outstanding as of December 31, 2019 and June 30, 2020 were 5.64% and 5.40% per annum, respectively. Long-term borrowings The Company’s long-term borrowings consisted of the following: As of December 31, 2019 June 30, 2020 Unsecured long-term borrowings 42,500 127,500 Secured long-term borrowings 8,726,497 10,157,961 8,768,997 10,285,461 Long-term borrowings were secured by the following assets: As of December 31, June 30, 2019 2020 Accounts receivable (Note) 508,847 911,692 Property and equipment, net 2,493,872 3,401,995 Prepaid land use rights, net 741,032 734,566 3,743,751 5,048,253 Note: The Company applied accounts receivable generated from certain data center operation as collateral to secure borrowings. The weighted average interest rates of long-term borrowings as of December 31, 2019 and June 30, 2020 were 7.40% and 7.02% per annum, respectively, taking into the consideration of debt issuance costs incurred relating to the facilities. The outstanding long-term borrowings mature serially from 2020 to 2032. The aggregate maturities of the above long-term borrowings for each for the five years and thereafter subsequent to June 30, 2020 are as follows: Long-term borrowings Twelve-months ending June 30, 2021 947,579 2022 1,995,581 2023 2,094,516 2024 2,258,340 2025 968,067 Thereafter 2,021,378 10,285,461 The Company entered into secured loan agreements with various financial institutions for project development and working capital purpose with terms ranging from 1 to 13 years. As of June 30, 2020, the Company had total working capital and project financing credit facilities of RMB17,814,872 from various financial institutions, of which the unused amount was RMB6,555,311. As of June 30, 2020, the Company had drawn down RMB11,259,561, of which RMB734,208 (net of debt issuance costs of RMB690) was recorded in short-term borrowings and RMB10,285,461 (net of debt issuance costs of RMB239,202) was recorded in long-term borrowings, respectively. Drawdowns from the credit facility are subject to the approval of the banks and are subject to the terms and conditions of each agreement. More specifically, the terms of these secured loan facility agreements generally include one or more of the following conditions. If any of the below conditions were to be triggered, the Company could be obligated to notify the lender or repay any loans outstanding immediately or on an accelerated repayment schedule: (i) STT Communications Ltd. ceases to, directly or indirectly, own at least 50.1% of the equity interests of STT GDC Pte. Ltd. (“STT GDC”); (ii) STT GDC (a) is not or ceases to, directly or indirectly, be the beneficial owner of at least 25% of the issued share capital of GDS Holdings, or (b) does not or ceases to have the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to cast, or control the casting of, at least 25% of the votes that may be cast at a meeting of the board of directors (or similar governing body) of GDS Holdings, or (c) is not or ceases to be the single largest shareholder of GDS Holdings; (iii) GDS Holdings and GDS Investment Company are not or cease to be, directly or indirectly, the legal and beneficial owner of 100% of the equity interests of, and have the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to control, GDS Investment Company (in the case of GDS Holdings), GDS Beijing, Global Data Solutions Co., Ltd. (“GDS Suzhou”), a subsidiary company of GDS Beijing and the relevant borrowing subsidiaries; (iv) Management HoldCo ceases to, directly or indirectly, own at least 100% of the equity interests of and have the power to control GDS Beijing or GDS Suzhou; (v) GDS Beijing, GDS Suzhou and the relevant borrowing subsidiaries cease to, directly or indirectly, be the legal and beneficial owner of 100% of the equity interests of, and have the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to control, their consolidated subsidiaries; (vi) there are changes in the shareholding structure of a principal operating subsidiary of GDS Holdings, as defined in the relevant loan facility agreement; and (vii) the IDC license of GDS Beijing or the borrowing subsidiaries, or the authorization by GDS Beijing to one such subsidiary to operate the data center business and provide IDC services under the auspices of the IDC license held by GDS Beijing, is cancelled or fail to be renewed on or before the expiry date. There are certain other events in the loan facility agreements the occurrence of which could obligate GDS Holdings to notify the lender or repay any loans outstanding immediately or on an accelerated repayment schedule, including, among others, if the borrowing subsidiary fails to use the loan in accordance with the use of proceeds as provided in the loan facility agreement, the borrowing subsidiary violates or fails to perform any of its commitments under the loan facility agreement, or if GDS Holdings is delisted before the maturity date under the relevant loan facility agreement. In addition, the terms of these loan agreements include financial covenants that limit certain financial ratios, such as the interest coverage ratio and gross leverage ratio, during the relevant period, as defined in the agreements. The terms of these loan agreements also include cross default provisions which could be triggered if the Company (i) fails to repay any financial indebtedness in an aggregate amount exceeding US$4,500, or, in some cases, RMB50,000, when due or within any originally applicable grace period; (ii) fails to repay any financial indebtedness or perform any of its obligations under any agreement which could have a material adverse effect on its performance of the loan facility agreements; (iii) fails to repay any financial indebtedness raised with any financial institution; or (iv) fails to perform any loan facility agreement with any financial institution which could result in immediate or accelerated repayment of the financial indebtedness or downgrading of the borrowing subsidiary by any credit rating agency administered by the People’s Bank of China (“PBOC”) in accordance with the regulations promulgated by PBOC governing loan market rating standards. As of June 30, 2020, the Company was in compliance with all of the abovementioned covenants. |
CONVERTIBLE BONDS PAYABLE
CONVERTIBLE BONDS PAYABLE | 6 Months Ended |
Jun. 30, 2020 | |
CONVERTIBLE BONDS PAYABLE | 10 CONVERTIBLE BONDS PAYABLE Convertible Notes due June 1, 2025 issued by the Company (“Convertible Bonds due 2025”) On June 5, 2018, the Company completed its issuance of Convertible Bonds due 2025 in an aggregate principal amount of US$300,000. The related issuance costs of US$8,948 were deducted from principal of the Convertible Bonds due 2025 and amortized over the period from issuance to the first put date (i.e. June 1, 2023) using the effective interest rate method. As of December 31, 2019 and June 30, 2020, accrued interests of RMB3,488 and RMB3,540 were recorded in accrued expenses, respectively. The key terms of the Convertible Bonds due 2025 are summarized as follows: Maturity Date ● June 1, 2025 Interest ● 2.0% per annum, accruing from June 5, 2018 (computed on the basis of 360-day year composed of twelve 30-day months), payable semiannually in arrears on June 1 and December 1 of each year Repurchase of Notes ● Holders will have the right to require the Company to repurchase for cash all of their notes, or any portion of the principal thereof that is equal to US$1 thousand or an integral multiple of US$1 thousand, on June 1, 2023 or if a fundamental change occurs at any time. Tax redemption ● The Company may redeem, at its option, all but not part of the Convertible Bonds due 2025 if it becomes obligated to pay to the holder of any note ‘‘additional amounts’’ (which are more than a de minimis amount) as a result of any change in tax law at the price equal to 100% of the principal amount together with accrued and unpaid interest. Upon receiving notice of redemption, each holder will have the right to elect to: convert its notes; or not have its notes redeemed and GDS Holdings will not pay any additional amounts as a result of such change in tax law. Conversion rights ● Holders may convert their notes at their option at any time prior to the close of business on the third scheduled trading day immediately preceding the maturity date. ● The conversion rate is initially 19.3865 ADSs of the Company per US$1 thousand principal amount of notes (equivalent to an initial conversion price of approximately US$51.58 per ADS), and subject to changes under certain anti-dilution conditions. The Company determined that the embedded conversion option of the Convertible Bonds due 2025 was not required to be accounted for as an embedded derivative pursuant to ASC 815 Derivatives and Hedging The effective interest rate of the convertible bonds, after considering the related issuance cost, was 2.65%as of December 31, 2019 and June 30, 2020. |
ACCRUED EXPENSES AND OTHER PAYA
ACCRUED EXPENSES AND OTHER PAYABLES | 6 Months Ended |
Jun. 30, 2020 | |
ACCRUED EXPENSES AND OTHER PAYABLES | 11 ACCRUED EXPENSES AND OTHER PAYABLES Accrued expenses and other payables consisted of the following: As of December 31, June 30, 2019 2020 Accrued interest expenses 43,776 48,795 Accrued debt issuance costs and other financing costs 28,082 53,933 Income tax payable 93,307 128,100 Other tax payable 28,259 54,519 Consideration payables for acquisitions 362,032 845,853 Deferred government grants 6,003 172 Accrued payroll and welfare benefits 97,486 75,178 Accrued professional fees 41,630 42,734 Accrued data center outsourcing service fees 17,989 6,857 Amount due to related parties 11,988 21,388 Amount due to a financial institution 34,190 112,380 Interest rate swap contracts (Note 15) 351 17,182 Other accrued operating expenses 38,020 59,484 Other payables 14,770 75,113 817,883 1,541,688 |
LEASE
LEASE | 6 Months Ended |
Jun. 30, 2020 | |
LEASE | 12 LEASE The Company enters into lease arrangements primarily for data center spaces, office spaces and equipment. Data center buildings and land leases During the six-month period ended June 30, 2020, the Company entered into lease agreements with the landlords to lease the buildings and land, including those acquired through acquisition of subsidiaries, for certain data centers. The Company assessed the lease classification of the building and land components separately at the commencement date. During the six-month period ended June 30, 2020, the Company recorded additional finance lease liabilities of RMB988,890 and operating lease liabilities of RMB390,515, respectively, through the above new leases or acquisition of subsidiaries. Build-to-suit leases Equipment lease During the six-month period ended June 30, 2020, the Company entered into lease agreements with a third-party lessor for the leases of certain equipment in Hebei, China, in which the underlying assets needs to be constructed. The lessor purchased these underlying assets prior to the lease commencement for the construction based on the Company’s specifications and supervision. The Company had the right to obtain the partially constructed underlying assets at any point during the construction period by making a payment to the lessor, so the Company concluded that it controls the underlying assets before the lease commencement in accordance with ASC 842-40-55-5. Accordingly, the Company recorded an asset for the estimated construction costs incurred for the equipment and a liability for those costs funded by the lessor during the construction period. Upon completion of the construction, the Company will assess if the arrangement qualifies for sales recognition under the sale and lease back accounting guidance. The obligations under above lease arrangements are recognized as other financing obligations. In 2019, the Company also entered into two lease agreements with a third-party lessor for the leases of certain equipment in Hebei, China. As the ownership of the underlying assets will be transferred to the Company by the end of the lease term, such leases are recognized as finance leases. The relevant leases commenced when the Company received the equipment. The amount paid by the lessor to its vendor for equipment which was not received by the Company at December 31, 2019, was recognized as other financing obligations. Such other financing obligations were reclassified to finance lease obligation upon commencement of the lease in the six-month period ended June 30, 2020. The components of lease cost are as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Finance lease cost: - Amortization of right-of-use assets 103,566 169,352 - Interest on lease liabilities 144,928 192,489 Operating lease cost 50,702 85,028 Short-term lease cost 1,772 3,223 Variable lease cost (Note) — (40,189) Total lease cost 300,968 409,903 Note: During the six-month period ended June 30, 2020, the Company was granted lease concessions of RMB40,142 by certain landlords due to the effects of the COVID-19 pandemic. The lease concessions were primarily in the form of rent reduction. Such concessions were recognized as variable lease cost (credit) in the period when the concession was granted. In addition, the Company recognized variable lease cost (credit) of RMB47 in the six-month period ended June 30, 2020 for certain finance leases with floating interest rate. Supplemental cash flow information related to leases is as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Cash paid for amounts included in measurement of lease liabilities (Note): - Operating cash flows from finance leases (119,396) (159,802) - Operating cash flows from operating leases (45,312) (62,123) - Financing cash flows from finance leases (203,911) (78,888) Non-cash information on lease liabilities arising from obtaining ROU assets - Finance leases 699,524 660,325 - Operating leases 3,770 406,853 Note: The above table does not include cash paid for purchase of land use rights and initial direct costs of leases of RMB570,821 in the six-month period ended June 30, 2020, which are included in "Payments for purchase of property and equipment and land use rights" in the consolidated statements of cash flows. Weighted average remaining lease term and weighted average discount rate for leases, excluding prepaid land use rights, are as follows: As of December 31, 2019 June 30, 2020 Weighted average remaining lease term: - Finance leases 15.2 14.1 - Operating leases 15.6 15.9 Weighted average discount rate: - Finance leases 6.91 % 7.06 % - Operating leases 6.35 % 6.25 % Maturities of lease and other financing obligations were as follows: As of December 31, 2019 As of June 30, 2020 Total of finance Total of finance Finance Other lease and other Operating Finance Other lease and other Operating lease financing financing lease lease financing financing lease obligations obligations obligations obligations Total obligations obligations obligations obligations Total Within 1 year 502,261 32,232 534,493 97,993 632,486 545,457 164,867 710,324 140,967 851,291 After 1 year but within 2 years 399,200 37,462 436,662 72,046 508,708 521,945 233,151 755,096 123,042 878,138 After 2 years but within 3 years 399,843 72,845 472,688 64,151 536,839 553,473 306,028 859,501 101,640 961,141 After 3 years but within 4 years 414,126 69,248 483,374 64,086 547,460 569,126 291,552 860,678 101,750 962,428 After 4 years but within 5 years 429,902 65,688 495,590 64,547 560,137 610,207 276,749 886,956 105,115 992,071 After 5 years 5,905,408 163,480 6,068,888 880,855 6,949,743 7,234,194 647,305 7,881,499 1,411,770 9,293,269 Total 8,050,740 440,955 8,491,695 1,243,678 9,735,373 10,034,402 1,919,652 11,954,054 1,984,284 13,938,338 Less: total future interest (3,387,232) (121,742) (3,508,974) (478,541) (3,987,515) (4,076,294) (497,689) (4,573,983) (769,087) (5,343,070) Less: estimated construction costs — (9,127) (9,127) — (9,127) — (47,924) (47,924) — (47,924) Present value of lease and other financing obligations 4,663,508 310,086 4,973,594 765,137 5,738,731 5,958,108 1,374,039 7,332,147 1,215,197 8,547,344 Including: - Current portion 222,473 55,139 277,612 230,746 73,362 304,108 - Non-current portion 4,751,121 709,998 5,461,119 7,101,401 1,141,835 8,243,236 As of June 30, 2020, the Company has additional leases, primarily for data center buildings, that have not yet commenced with total future lease payments of RMB292,830. These leases are expected to commence in fiscal year 2020 with lease terms of 1 year to 20 years. |
OTHER LONG-TERM LIABILITIES
OTHER LONG-TERM LIABILITIES | 6 Months Ended |
Jun. 30, 2020 | |
OTHER LONG-TERM LIABILITIES | 13 OTHER LONG-TERM LIABILITIES Other long-term liabilities consisted of the following: As of December 31, 2019 June 30, 2020 Consideration payable for acquisitions 23,062 19,655 Payables for purchase of property and equipment 231,459 185,310 Deferred revenue – non-current (Note 4) 15,419 14,865 Deferred government grants 6,507 6,196 Interest rate swap contracts (Note 15) 10,408 — Asset retirement obligations 52,441 62,719 Others 6,241 9,589 Total 345,537 298,334 |
REDEEMABLE PREFERRED SHARES
REDEEMABLE PREFERRED SHARES | 6 Months Ended |
Jun. 30, 2020 | |
REDEEMABLE PREFERRED SHARES | 14 REDEEMABLE PREFERRED SHARES On March 27, 2019 (the “Issue Date”), GDS Holdings completed its issuance of 150,000 Convertible Preferred Shares ("redeemable preferred shares") to an investor at the subscription price of US$1 thousand per share with total consideration of US$150,000. The movement of redeemable preferred shares is set out as below: Redeemable preferred shares Balance at January 1, 2020 1,061,981 Accrual of redeemable preferred shares dividends 26,667 Settlement of redeemable preferred shares dividends (40,068) Foreign exchange impact 15,557 Balance at June 30, 2020 1,064,137 Key terms of the convertible preferred shares Dividends The holders of the preferred shares are entitled to receive, in priority to the holders of the ordinary shares, cumulative preferred share dividends which are payable quarterly in arrears on March 15, June 15, September 15 and December 15, commencing on June 15, 2019 (each such payment date being a “Regular Dividend Payment Date”). The dividends are 5.0% per annum of the respective preferred shares Stated Value (i.e. the subscription price of preferred shares plus any accrued dividends that are not paid on Regular Dividend Payment Date) (and shall be adjusted to an amount equal to the ordinary share dividend rate if higher). The dividend rate will increase to 7.0% per annum and further increase by 50 basis points each quarter thereafter if the Company has not redeemed all of the preferred shares outstanding as of the eighth anniversary of the Issue Date. The dividends are computed on a basis of a 360-day year and the actual number of days elapsed. Dividends may, at the option of the Company, be paid in cash only, be paid in cash or in additional preferred shares, or a combination thereof. Conversion The holders of preferred shares have the right to convert any or all of their holdings of preferred shares Stated Value into Class A Ordinary Shares based on the conversion rate then in effect. In addition, if, at any time beginning on March 15, 2022, (i) the volume-weighted average price (“VWAP”) per ADS of the GDS Holdings equals or exceeds US$53.40 (adjusted as according to anti-dilution provisions) for at least 20 trading days in any period of 30 consecutive trading days and (ii) the average daily trading volume of the ADS for such 20 qualifying trading days is at least US$10,000 in the aggregate, at the Company’s election, all of the preferred shares then outstanding shall be converted into a number of Class A Ordinary Shares based on the conversion rate then in effect. The initial conversion rate is corresponding to a conversion price of US$35.60 per ADS, and will be subject to adjustments for any split, subdivision, combination, consolidation, recapitalization or similar event. Liquidation preference Upon a liquidation, after satisfaction of all liabilities and obligations to creditors of the Company and before any distribution or payment shall be made to holders of ordinary shares, each holder of preferred shares shall be entitled to receive an amount per preferred share equal to the greater of: (1) the Stated Value of preferred shares plus any dividends accumulated but unpaid thereon after the immediately preceding Regular Dividend Payment Date to but excluding the date of liquidation; (2) the payment such holders would have received had such holders, immediately prior to such liquidation converted their preferred shares into Class A Ordinary Shares. Optional Redemption by the Company The preferred shares may be redeemed, in whole or in part, at any time after March 15, 2027, at the option of the Company at a redemption price per share equal to the sum of the Stated Value per preferred share to be redeemed plus an amount per share equal to accrued but unpaid dividends on such preferred shares after the immediately preceding Regular Dividend Payment Date to but excluding the date of redemption. Repurchase at the Option of the Holder Upon a Fundamental Change Upon the occurrence of a Fundamental Change, as defined in the share subscription agreement, each holder of preferred shares shall have the right to require the Company to repurchase all or any portion of such holder’s preferred shares at a purchase price per preferred share equal to the greater of (i) the sum of (x) 100% multiplied by the Stated Value per preferred share plus (y) an amount equal to accrued but unpaid dividends on such preferred share after the immediately preceding Regular Dividend Payment Date to but excluding the date of repurchase, plus (z) solely in the event that such Fundamental Change occurs prior to the third anniversary of the Issue Date, the present value of all undeclared dividends from the date of redemption to, and including, the third anniversary of the Issue Date, in each case, discounted to the date of redemption on the basis of actual days elapsed (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate, which is the yield to maturity at the time of computation of United States Treasury securities with a constant maturity, plus 50 basis points, and (ii) the amount of cash and/or other assets such holder would have received had such holder, immediately prior to the occurrence of such Fundamental Change, converted such preferred shares into Class A Ordinary Shares. Financing for Redemption of Convertible Preferred Shares In the event that any preferred shares remain outstanding from and after the tenth anniversary of the Issue Date, the holders of preferred shares constituting at least 90% of the preferred shares issued as of the Issue Date (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the preferred shares) shall have the right to require the Company to sell all or a portion of its business and/or to conduct other fundraising or refinancing activities, and use reasonable best efforts to consummate such sale or to issue equity or debt securities (or obtain other debt financing) in an amount sufficient to redeem in full in cash, and use best endeavors to as soon as reasonably practicable redeem in full in cash, all of the preferred shares then outstanding at a redemption price per share equal to the sum of the Stated Value per preferred share to be redeemed plus an amount per share equal to accrued but unpaid dividends on such preferred shares after the immediately preceding Regular Dividend Payment Date to but excluding the date of redemption. Voting rights The holders of the preferred shares have voting rights equivalent to the ordinary shareholders on an “if converted” basis. In addition, the Company shall not take certain actions without first obtaining the written consent or affirmative vote at a meeting called for that purpose by holders of at least 75% of the then outstanding preferred shares. The Company has classified these preferred shares as mezzanine equity in the consolidated balance sheets since they are contingently redeemable upon a Fundamental Change or include liquidation preference provisions that are not solely within the Company’s control. The Company evaluated the embedded conversion, call and put options in the preferred shares to determine if they require bifurcation and are accounted for as derivatives, and concluded that there were no embedded derivatives to be bifurcated from the preferred share pursuant to ASC 815. The Company also determined that there was no BCF attributable to the preferred shares because the initial conversion price was higher than the fair value of the Company's ordinary shares. The Company incurred issuance cost of US$2,646 for the issuance of such preferred shares, which was treated as an adjustment to the initial value of the redeemable preferred shares. The Company has elected to measure the redeemable preferred shares by recognizing changes in the redemption value immediately as they occur and adjust the carrying amount to equal the redemption value at the end of each reporting period. As a result, such issuance cost is immediately recognized as a change in redemption value and charged against retained earnings or, in the absence of retained earnings, by charges against additional paid-in capital. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 30, 2020 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | 15 DERIVATIVE FINANCIAL INSTRMENTS As of December 31, 2019 and June 30, 2020, the Company had outstanding interest rate swap contracts with notional amounts of US$118,500 and US$115,900, respectively. The following table reflects the fair values of derivatives included in the consolidated balance sheets as of December 31, 2019 and June 30, 2020: Consolidated balance sheets location As of December 31, 2019 June 30, 2020 Interest rate swap contracts (not designated as hedging instruments) Accrued expenses and other payables 351 17,182 Interest rate swap contracts (not designated as hedging instruments) Other long-term liabilities 10,408 — The following table reflects the location in the consolidated statements of operations and the amount of realized and unrealized gains (losses) recognized for the derivative contracts not designated as hedging instruments for the six-month periods ended June 30, 2019 and 2020: Consolidated statements of operations location Six-month periods ended June 30, 2019 2020 (unaudited) Interest rate swap contracts (not designated as hedging instruments) — realized loss Interest expenses (378) (3,084) Interest rate swap contracts (not designated as hedging instruments) — unrealized loss Interest expenses (12,575) (6,180) (12,953) (9,264) |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 6 Months Ended |
Jun. 30, 2020 | |
FAIR VALUE MEASUREMENT | 16 FAIR VALUE MEASUREMENT As of December 31, 2019 and June 30, 2020, the Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows: Fair value measurement using Level 2 inputs As of December 31, 2019 June 30, 2020 Liabilities - Interest rate swap contracts (Note 15) 10,759 17,182 Following is a description of the valuation techniques that the Company uses to measure fair value of other financial assets and financial liabilities: ● Short-term financial instruments (cash, restricted cash, accounts receivable and payable, short-term borrowings, and accrued expenses and other payables)—cost approximates fair value because of the short maturity period. ● Long-term borrowings—fair value is based on the amount of future cash flows associated with each debt instrument discounted at the Company’s current borrowing rate for similar debt instruments of comparable terms. The carrying values of the long-term borrowings approximate their fair values as all the long-term debt carry variable interest rates which approximate rates currently offered by the Company’s bankers for similar debt instruments of comparable maturities. ● Convertible Bonds payable—the estimated fair value was RMB2,448,646 and RMB3,408,248 as of December 31, 2019 and June 30, 2020, respectively. The fair value was measured based on the price in the open market. |
ORDINARY SHARES
ORDINARY SHARES | 6 Months Ended |
Jun. 30, 2020 | |
ORDINARY SHARES | 17 ORDINARY SHARES On March 19, 2019, the Company completed a public offering in which the Company offered and sold 13,731,343 ADSs (or 109,850,744 Class A ordinary shares), including 1,791,044 ADSs (or 14,328,352 Class A ordinary shares) purchased by the underwriters by exercising their option. The Company raised a total of US$444,699 (RMB2,982,242) in proceeds from this public offering, net of underwriting discounts and commissions and other issuance costs. In June 2020, two investors, Hillhouse Capital ("Hillhouse") and STT GDC, purchased, through a private placement, of US$400,000 and US$105,000 respectively of 62,153,848 newly issued Class A ordinary shares of the Company at a price equivalent to US$65 per ADS (or US$8.125 per share). The Company raised a total of US$500,784 (RMB3,533,285) in proceeds from this private placement, after deducting underwriting commissions and other issuance costs. As of June 30, 2020, the Company’s outstanding share capital consisted of 1,210,996,227 Class A ordinary shares and 67,590,336 Class B ordinary shares. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2020 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 18 SHARE-BASED COMPENSATION Equity Incentive Plans The Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”) in July 2014 for the granting of share options to key employees, directors and external consultants in exchange for their services. The total number of shares, which may be issued under the 2014 Plan, is 29,240,000 shares. The Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”) in August 2016 for the granting of share options, stock appreciation rights and other stock-based award (collectively referred to as the Awards) to key employees and directors. The maximum aggregate number of shares, which may be subject to Awards under the Plan, is 56,707,560 shares, provided, however, that the maximum aggregate number of shares are subject to certain automatic approval mechanism up to 3% of total issued and outstanding shares of the Company , if and whenever the shares which may be subject to equity awards under the 2016 Plan accounts for less than 1.5% of the Company's total issued and outstanding shares. A summary of the option activity is as follows: Weighted average Weighted grant-date Number average fair value of options exercise price per option (RMB) (RMB) Options outstanding January 1, 2020 14,629,096 5.4 1.7 Exercised (13,960,096) 5.5 1.6 Options outstanding at June 30, 2020 669,000 5.5 2.9 Options vested and expect to vest at June 30, 2020 669,000 5.5 2.9 Total intrinsic value of options exercised was RMB204,449 (unaudited) and RMB615,542, respectively, for the six-month periods ended June 30, 2019 and 2020. The following table summarizes information with respect to stock options outstanding and stock options exercisable as of June 30, 2020: Weighted average Weighted Number remaining average of shares contractual life exercise price (years) (RMB) Options outstanding and exercisable 669,000 0.8 5.5 As of December 31, 2019 and June 30, 2020, there were no unvested employee or non-employee stock options. Aggregate intrinsic value of options outstanding and exercisable as of December 31, 2019 and June 30, 2020 was RMB578,481 and RMB43,470, respectively. Settlement of liability-classified restricted shares award In March and May 2019, the Company issued a total of 121,568 fully vested restricted shares to its directors to settle a portion of their remuneration for services provided by the directors, which had been recorded in general and administrative expenses. The number of restricted shares issued was determined by the fair value of the restricted shares on the date of settlement and the share-settled portion of the liability of RMB3,627. In March and June 2020, the Company issued a total of 100,136 fully vested restricted shares to its directors to settle a portion of their remuneration for services provided by the directors, which had been recorded in general and administrative expenses. The number of restricted shares issued was determined by the fair value of the restricted shares on the date of settlement and the share-settled portion of the liability of RMB4,675. Pursuant to ASC 480-10-25-14, such award that is share-settleable for a fixed monetary amount is a liability-classified award and therefore is re-measured each reporting period until settlement. Upon issuance of the shares to settle the obligation, equity is increased by the amount of the liability settled in shares and no additional share-based compensation expense was recorded. A summary of the restricted share activity is as follows: Weighted average grant- Number of date fair value per share Shares (RMB) Unvested at January 1, 2020 33,357,296 22.4 Granted 100,136 46.8 Vested (3,611,936) 8.0 Forfeited (656,248) 8.2 Unvested at June 30, 2020 29,189,248 24.6 The Company recognized share-based compensation expenses of RMB62,795 (unaudited) and RMB133,842 for the six-month periods ended June 30, 2019 and 2020, respectively, for the restricted share awards. As of June 30, 2020, total unrecognized compensation expense relating to the unvested shares was RMB229,750, which is expected to be recognized over a weighted average period of 1.52 years using the graded-vesting attribution method. The Company did not capitalize any of the share-based compensation expenses as part of the cost of any asset for the six-month periods ended June 30, 2019 and 2020. Total intrinsic value of restricted shares vested was RMB74,940 (unaudited) and RMB182,254, respectively, for the six-month periods ended June 30, 2019 and 2020. Aggregate intrinsic value of unvested restricted shares as of June 30, 2020 was RMB2,057,665. A summary of share-based compensation expenses for the six-month periods ended June 30, 2019 and 2020 is as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Costs of revenue 14,858 34,439 Selling and marketing expenses 14,697 26,124 General and administrative expenses 32,509 71,527 Research and development expenses 870 1,752 Total share-based compensation expenses 62,934 133,842 |
REVENUE
REVENUE | 6 Months Ended |
Jun. 30, 2020 | |
REVENUE | 19 REVENUE Net revenue consisted of the following: Six-month periods ended June 30, 2019 2020 (unaudited) Colocation services 1,532,192 2,069,387 Managed service and others 343,848 497,677 Service revenue 1,876,040 2,567,064 IT equipment sales 990 15,559 Total 1,877,030 2,582,623 |
INCOME TAX
INCOME TAX | 6 Months Ended |
Jun. 30, 2020 | |
INCOME TAX | 20 INCOME TAX Pursuant to the rules and regulations of the Cayman Islands, GDS Holdings is not subject to any income tax in the Cayman Islands. The Company's PRC entities are subject to the PRC Corporate Income Tax ("CIT") rate of 25%. The Company’s Hong Kong SAR entities are subject to the Hong Kong SAR Profits Tax rate of 16.5%. A two-tiered Profits Tax rates regime was introduced since year 2018 where the first HK$2 million of assessable profits earned will be taxed at half the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-fragmentation measure where each group will have to nominate only one entity in the group to benefit from the progressive rates. The Company's Singapore entities are subject to the Singapore CIT rate of 17%. The operating results before income tax and the provision for income taxes by tax jurisdictions for the six-month periods ended June 30, 2019 and 2020 is as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Loss (income) before income taxes: PRC 59,174 (46,466) Other jurisdictions 157,788 197,457 Total loss before income taxes 216,962 150,991 Current tax expenses: PRC 33,669 102,351 Total current tax expenses 33,669 102,351 Deferred tax benefits: PRC (20,852) (60,264) Total deferred tax benefits (20,852) (60,264) Total income tax expenses 12,817 42,087 The actual income tax expense reported in the consolidated statements of operations differs from the amount computed by applying the PRC statutory income tax rate to loss before income taxes due to the following: Six-month periods ended June 30, 2019 2020 (unaudited) PRC enterprise income tax rate 25.0 % 25.0 % Non-PRC resident enterprises not subject to income tax (16.8) % (43.4) % Tax differential for entities in non-PRC jurisdiction (1.3) % (2.5) % Preferential tax rate 0.0 % (0.8) % Tax effect of current period permanent differences 0.0 % 3.3 % Non-taxable income 0.0 % 9.1 % Change in valuation allowance (17.0) % (23.4) % Return to provision adjustment 4.2 % 4.8 % (5.9) % (27.9) % The components of deferred tax assets and liabilities are as follows: As of December 31, 2019 June 30, 2020 Deferred tax assets: Allowance for accounts receivable 12 104 Government subsidy 3,127 1,592 Accrued expenses 27,601 35,741 Asset retirement obligation 13,110 15,680 Leases — 13,457 Net operating loss carry forwards 267,159 322,473 Total gross deferred tax assets 311,009 389,047 Valuation allowance on deferred tax assets (205,976) (246,750) Deferred tax assets, net of valuation allowance 105,033 142,297 Deferred tax liabilities: Property and equipment (171,656) (148,284) Intangible assets (97,102) (137,878) Prepaid land use rights (1,612) (1,592) Leases (9,568) — Accounts receivable (4,836) — Total deferred tax liabilities (284,774) (287,754) Net deferred tax liabilities (179,741) (145,457) Analysis as: Deferred tax assets 72,931 136,809 Deferred tax liabilities (252,672) (282,266) Net deferred tax liabilities (179,741) (145,457) The following table presents the movement of the valuation allowance for the deferred tax assets: Six-month periods ended June 30, 2019 2020 (unaudited) Balance at the beginning of the period 155,852 205,976 Increase during the period 37,142 40,774 Balance at the end of the period 192,994 246,750 As of June 30, 2020, the Company’s net deferred tax assets were RMB136,809, which is net of a valuation allowance of RMB246,750. The deferred tax assets for net operating loss carry forwards and related valuation allowance were RMB316,985 and RMB207,304, respectively as of June 30, 2020. This valuation allowance was related to the deferred tax assets of certain subsidiaries of the Company. These entities were in a cumulative loss position with net operating loss carry forwards which are subject to expiration. Management evaluated the realizability of the deferred tax assets associated with the Company’s net operating loss carry forwards to determine whether there was more than a 50% likelihood that these deferred tax assets would be realized, based on the Company’s expectations of future taxable income and timing of net operating losses carry forwards expirations. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or utilized. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The net operating losses carry forwards of the Company’s PRC subsidiaries amounted to RMB1,175,104 as of June 30, 2020, of which RMB28,534, RMB42,796, RMB95,686, RMB290,251, RMB350,896 and RMB366,941 will expire if unused by December 31, 2020, 2021, 2022, 2023, 2024 and 2025, respectively. Uncertainties exist with respect to how the current income tax law in the PRC applies to the Company’s overall operations, and more specifically, with regard to tax residency status. The 2008 Enterprise Income Tax Law (the “EIT Law”) includes a provision specifying that legal entities organized outside the PRC are considered residents for Chinese income tax purposes if the place of effective management or control is within the PRC. The implementation rules to the EIT Law provide that non-resident legal entities are considered PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc., occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, the Company does not believe that the legal entities organized outside the PRC should be treated as residents for EIT Law purposes. If the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC are deemed resident enterprises, the Company and its subsidiaries registered outside the PRC will be subject to the PRC income tax at a rate of 25%. If the Company were to be non-resident for PRC tax purposes, dividends paid to it from profits earned by the PRC subsidiaries after January 1, 2008 would be subject to a withholding tax. The EIT Law and its relevant regulations impose a withholding tax at 10%, unless reduced by a tax treaty or agreement, for dividends distributed by a PRC-resident enterprise to its non-PRC-resident corporate investor for earnings generated beginning on January 1, 2008. Undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. The Company has not recognized any deferred tax liability for the undistributed earnings of the PRC-resident enterprise as of December 31, 2019, and June 30, 2020 as the Company plans to permanently reinvest these earnings in the PRC. Each of the PRC subsidiaries does not have a plan to pay dividends in the foreseeable future and intends to retain any future earnings for use in the operation and expansion of its business in the PRC. |
DISTRIBUTION OF PROFIT
DISTRIBUTION OF PROFIT | 6 Months Ended |
Jun. 30, 2020 | |
DISTRIBUTION OF PROFIT | 21 DISTRIBUTION OF PROFIT Pursuant to the laws and regulations of the PRC, the Company’s PRC entities are required to allocate at least 10% of their after tax profits, after making good of accumulated losses as reported in their PRC statutory financial statements, to the general reserve fund and have the right to discontinue allocations to the general reserve fund if the balance of such reserve has reached 50% of their registered capital. The general reserves are not available for distribution to the shareholders (except in liquidation) and may not be transferred in the form of loans, advances, or cash dividend. These PRC entities are restricted in their ability to transfer the registered capital and general reserve fund to GDS Holdings in the form of dividends, loans or advances. The restricted portion amounted to RMB7,367,536 and RMB8,437,718 as of December 31, 2019 and June 30, 2020, respectively, including non-distributable general reserve fund of RMB15,712 and RMB15,712 as of December 31, 2019 and June 30, 2020 respectively. |
LOSS PER ORDINARY SHARE
LOSS PER ORDINARY SHARE | 6 Months Ended |
Jun. 30, 2020 | |
LOSS PER ORDINARY SHARE | 22 LOSS PER ORDINARY SHARE The computation of basic and diluted loss per share is as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Net loss (229,779) (193,078) Change in redemption value of redeemable preferred shares (17,760) — Cumulative dividend on redeemable preferred shares (13,472) (26,667) Net loss attributable to ordinary shareholders (261,011) (219,745) Weighted average number of ordinary shares outstanding - basic and diluted 1,070,590,091 1,186,168,652 Loss per ordinary share - basic and diluted (0.24) (0.19) Note: During the year ended December 31, 2019, the Company issued 48,962,896 ordinary shares to its share depository bank, which have been and will continue to be used to settle stock option and restricted share awards upon their exercise. No consideration was received by the Company for this issuance of ordinary shares. These ordinary shares are legally issued and outstanding but are treated as escrowed shares for accounting purposes and, therefore, have been excluded from the computation of loss per ordinary share. Any ordinary shares not used in the settlement of stock option and restricted share awards will be returned to the Company. The following securities were excluded from the computation of diluted loss per share as inclusion would have been anti-dilutive. The share options and restricted shares below represented the maximum number of shares to be issued. Six-month periods ended June 30, 2019 2020 (unaudited) Share options/restricted shares 43,134,256 29,858,248 Convertible bonds payable 46,527,600 46,527,600 Total 89,661,856 76,385,848 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Jun. 30, 2020 | |
SEGMENT INFORMATION | 23 SEGMENT INFORMATION The Company has one operating segment, which is the design, build-out and operation of data centers. The Company’s chief operating decision maker is the chief executive officer of the Company who reviews the Company’s consolidated results of operations in assessing performance of and making decisions about resource allocations to this segment. Accordingly, no reportable segment information is presented. During the six-month periods ended June 30, 2019 and 2020, substantially all of the Company’s operations are in the PRC. As of December 31, 2019 and June 30, 2020, the long-lived assets amounted to RMB1,605,892 and RMB1,740,765, respectively, were located in Hong Kong SAR, and substantially all of the remaining long-lived assets were in the PRC. |
MAJOR CUSTOMERS
MAJOR CUSTOMERS | 6 Months Ended |
Jun. 30, 2020 | |
MAJOR CUSTOMERS | 24 MAJOR CUSTOMERS During the six-month period ended June 30, 2020, the Company had three direct contracting customers, which generated over 10% of the Company’s total revenues or RMB670,730, RMB416,396 and RMB270,071, respectively. During the six-month period ended June 30, 2020, one of three direct contracting customers was also an end user customer. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | 25 COMMITMENTS AND CONTINGENCIES (a) Capital commitments Capital commitments outstanding at December 31, 2019 and June 30, 2020 not provided for in the financial statements were as follows: As of December 31, June 30, 2019 2020 Contracted for 2,722,084 3,343,911 Commitment for purchase of land use rights was RMB4,500 and nil as of December 31, 2019 and June 30, 2020, respectively. (b) Lease commitments The Company’s lease commitments are disclosed in note 12. (c) Litigation contingencies In August 2018, the Company and its chief executive officer and chief financial officer were named as defendants in a consolidated class action lawsuit filed in the United States District Court. The complaints in the action allege that the Company’s registration statements contained misstatements or omissions regarding its business, operation, and compliance in violation of the U.S. securities laws. As of December 31, 2019, the Company had unpaid legal cost and other related costs of approximately RMB5,748 pertaining to this. On April 7, 2020, the US District Court for the Southern District of New York granted the motion of the defendants (including GDS Holdings, its chief executive officer and chief financial officer) to dismiss the class action lawsuit. On May 6, 2020, plaintiffs filed a notice of appeal of that decision. On June 29, 2020, plaintiffs voluntarily withdrew their appeal, resulting in the dismissal of the case against all Defendants with prejudice. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2020 | |
RELATED PARTY TRANSACTIONS | 26 RELATED PARTY TRANSACTIONS During the six-month periods ended June 30, 2019 and 2020, the related parties of the Company are as follows: Name of party Relationship STT GDC Principal ordinary shareholder of the Company STT Singapore DC Pte. Ltd. Subsidiary of STT GDC STT DEFU 2 Pte. Ltd. Subsidiary of STT GDC In addition to the related party information disclosed elsewhere in the consolidated financial statements, the Company entered into the following material related party transactions. (a) Major transactions with related parties Six-month periods ended June 30, 2019 2020 (unaudited) Commission income STT Singapore DC Pte. Ltd. (i) — 246 STT DEFU 2 Pte. Ltd. (i) — 244 — 490 (b) Major balances with related parties As of December 31, June 30, 2019 2020 Amount due to related parties: (i) STT DEFU 2 Pte. Ltd. 6,638 11,193 STT Singapore DC Pte. Ltd. 5,350 10,195 11,988 21,388 Note (i): During the year ended December 31, 2019, the Company successfully referred a customer to STT Singapore DC Pte. Ltd. and STT DEFU 2 Pte. Ltd. As of December 31, 2019, amount due to related parties represents the service fee received on behalf of the related parties for one of their customers, which is recorded in accrued expenses and other payables. During the six-month period ended June 30, 2020, the Company recognized RMB246 and RMB244, respectively, as commission income from STT Singapore DC Pte. Ltd. and STT DEFU 2 Pte. Ltd. Income earned is based on amount billed on behalf of these two related parties to the ultimate customer amounting to RMB17,237 and RMB19,655, respectively. As of June 30, 2020, amount due to related parties represents the service fee received on behalf of the related parties for one of their customers, which is recorded in accrued expenses and other payables. These amounts due to related parties are trade in nature and are settled on a recurring basis. |
PARENT ONLY FINANCIAL INFORMATI
PARENT ONLY FINANCIAL INFORMATION | 6 Months Ended |
Jun. 30, 2020 | |
PARENT ONLY FINANCIAL INFORMATION | 27 PARENT ONLY FINANCIAL INFORMATION The following condensed parent company financial information of GDS Holdings has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries. As of June 30, 2020, there were no material contingencies, significant provisions of long-term obligations, mandatory dividend or redemption requirements of redeemable stocks or guarantees of GDS Holdings, except for those, which have been separately disclosed in the consolidated financial statements. Condensed Balance Sheets As of December 31, 2019 June 30, 2020 Assets Current assets Cash 2,560,388 4,280,909 Prepaid expenses 7,048 3,987 Other current assets 21,537 16,688 Total current assets 2,588,973 4,301,584 Restricted cash 27,225 27,636 Investment and loans to subsidiaries 11,539,590 13,436,889 Other non-current assets 4,954 4,542 Total assets 14,160,742 17,770,651 Liabilities, Redeemable Preferred Shares and Shareholders’ Equity Current liabilities Accounts payable 7,168 695 Accrued expenses and other payables 49,546 93,290 Due to subsidiaries 928 942 Total current liabilities 57,642 94,927 Long-term borrowings 681,235 686,730 Convertible bonds payable 2,049,654 2,086,179 Other long-term liabilities 16,649 10,016 Total liabilities 2,805,180 2,877,852 Redeemable preferred shares (US$0.00005 par value; 150,000 shares authorized, issued and outstanding as of December 31, 2019 and June 30, 2020; Redemption value of RMB1,061,981 and RMB1,064,137 as of December 31, 2019 and June 30, 2020, respectively; Liquidation value of RMB1,537,636 and RMB2,378,419 as of December 31, 2019 and June 30, 2020, respectively) 1,061,981 1,064,137 Shareholders' equity Ordinary shares (US$0.00005 par value; 2,002,000,000 shares authorized; 1,148,842,379 and 1,210,996,227 Class A ordinary shares issued outstanding 412 434 Additional paid-in capital 12,403,043 16,125,571 Accumulated other comprehensive loss (52,684) (47,075) Accumulated deficit (2,057,190) (2,250,268) Total shareholders’ equity 10,293,581 13,828,662 Commitments and contingencies Total liabilities, redeemable preferred shares and shareholders’ equity 14,160,742 17,770,651 Condensed Statements of Operations Six-month periods ended June 30, 2019 2020 (unaudited) Net revenue — — Cost of revenue (17,414) (36,659) Gross loss (17,414) (36,659) Operating expenses Selling and marketing expenses (15,301) (25,662) General and administrative expenses (66,492) (94,191) Research and development expenses (870) (1,752) Loss from operations (100,077) (158,264) Other income (expenses): Interest income 23,490 2,837 Interest expenses (68,340) (65,283) Equity in (loss) income of subsidiaries (84,852) 28,796 Others, net — (1,164) Loss before income taxes (229,779) (193,078) Income tax expenses — — Net loss (229,779) (193,078) Condensed Statements of Comprehensive Loss Six-month periods ended June 30, 2019 2020 (unaudited) Net loss (229,779) (193,078) Other comprehensive income: Foreign currency translation adjustments, net of nil tax 66,872 5,609 Comprehensive loss (162,907) (187,469) Condensed Statements of Cash Flows Six-month periods ended June 30, 2019 2020 (unaudited) Operating activities: Net cash used in operating activities (39,268) (60,886) Investing activities Increase of due from subsidiaries (1,506,159) (1,843,512) Net cash used in investing activities (1,506,159) (1,843,512) Financing activities: Proceeds from long-term borrowings 268,100 — Payment of issuance cost of borrowings — (10,619) Proceeds from exercise of stock options 43,508 77,415 Net proceeds from issuance of ordinary shares 2,982,242 3,560,004 Net proceeds from issuance of redeemable preferred shares 989,349 — Payment of redeemable preferred shares dividends (11,458) (40,068) Net cash provided by financing activities 4,271,741 3,586,732 Effect of exchange rate changes on cash and restricted cash 84,356 38,598 Net increase in cash and restricted cash 2,810,670 1,720,932 Cash and restricted cash at beginning of period 817,488 2,587,613 Cash and restricted cash at end of period 3,628,158 4,308,545 Supplemental disclosures of cash flow information Interest paid 41,006 45,692 Supplemental disclosures of non-cash investing and financing activities Settlement of liability-classified restricted share award 3,627 4,675 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2020 | |
SUBSEQUENT EVENTS | 28 SUBSEQUENT EVENTS a) New loan facilities From July 2020 to October 19, 2020, six of the subsidiaries of the Company entered into various facility agreements with third-party banks for a total amount of RMB4,662,000 with various maturity dates. b) Coronavirus Outbreak Beginning in January 2020, the emergence and wide spread of the novel Coronavirus (“COVID-19”) has resulted in quarantines, travel restrictions, and the temporary closure of businesses and facilities in China and elsewhere. Substantially all of the Company’s revenue and workforce are concentrated in China. Any economic slowdown in China or worldwide due to COVID-19 may adversely affect the Company’s business operations, financial condition and operating results, including but not limited to negative impact to the Company’s total revenues, slower collection of accounts receivable and additional allowance for doubtful accounts. While many of the restrictions on movement within China have been relaxed, the economy is seemingly on the path of recovery and the Company’s business has not been materially impacted at this time, there remains uncertainty about the viral resurgence which may impact the business ongoing performance and development. With the uncertainties surrounding the COVID-19 outbreak until a cure and vaccine has be discovered, the threat to the business disruption and the related financial impact remains. c) Establishment of a joint venture In July 2020, the Company formed a joint venture (“JV”) to undertake a major new data center project in Beijing (“BJ13”) with a private equity fund (“CPE Fund”) controlled by CITIC Private Equity Funds Management Co., Limited. The Company initially owns a 58% controlling interest in the JV, while CPE Fund owns 42%. The JV has taken an 82% equity interest in Tenglong IOT (Beijing) Data Technology Co., Ltd (“LicenseCo.”) through the acquisition of shares and injection of new capital. The LicenseCo. has taken an 88% equity interest in a company which owns the land use right for the site (“LandCo.”) through the injection of new capital. The JV will proceed to acquire the remaining 18% of the LicenseCo. when the data center development is complete and certain other conditions are met. The LicenseCo. will buy out the remaining 12% equity interest in the LandCo. when certain conditions are met. On completion of the project and satisfaction of certain other conditions, the Company will acquire CPE Fund’s 42% equity interest in the JV. d) Offer to acquire Beijing 14 On September 22, 2020, the Company extended a legally-binding offer to acquire 100% of the equity interests in target companies which own a major data center in the Shunyi District of Beijing ("BJ14"). This transaction is subject to entry into definitive agreements as well as the completion of certain conditions precedent to the closing the transaction. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Principles of Consolidation | (a) Principles of Consolidation The accompanying consolidated financial statements include the financial statements of GDS Holdings, its subsidiaries and consolidated variable interest entities and variable interest entities' subsidiaries for which the Company is the primary beneficiary. In certain regions of the PRC, the Company's operations are conducted through Shanghai Xinwan Enterprise Management Co., Ltd. ("Management HoldCo"), Beijing Wanguo Chang’an Science and Technology Co., Ltd. (“GDS Beijing"), GDS Beijing's subsidiaries and Shanghai Shu’an Data Services Co., Ltd. (“GDS Shanghai") (referred to as the “VIEs”) to comply with the PRC laws and regulations, which prohibit foreign investments in companies that are engaged in data center related business in those regions. Individuals acting as nominee equity holders ultimately hold the legal equity interests of the VIEs on behalf of the Company. The equity holders of GDS Beijing and GDS Shanghai were William Wei Huang, CEO of the Company, and his relative. In order to enhance corporate governance and facilitate administration of the VIEs, in December 2019, GDS Holdings completed transfer of ownership of the 100% equity interest of GDS Beijing and GDS Shanghai from William Wei Huang and his relative to a newly established holding company, Management HoldCo. The entire equity interest in Management HoldCo is held by a number of management personnel designated by the Board of Directors of GDS Holdings. In conjunction with the transfer of legal ownership, GDS (Shanghai) Investment Co., Ltd. ("GDS Investment Company"), a subsidiary of GDS Holdings, entered into a series of contractual arrangements with Management HoldCo, its shareholders, GDS Beijing and GDS Shanghai to replace the previous contractual arrangements with GDS Beijing and GDS Shanghai on substantially the same terms under such previous contractual arrangements. The previous contractual arrangements were terminated simultaneously when the current contractual arrangements came into effect, and the subsidiary of GDS Holdings under the previous and current contractual arrangements is the same entity, namely GDS Investment Company. GDS Holdings also replaced the sole director of GDS Shanghai and certain subsidiaries of GDS Beijing with a board of three directors. William Wei Huang acts as the Chairman of the board of directors of Management HoldCo, GDS Investment Company, GDS Beijing and GDS Shanghai and their subsidiaries respectively. Other management members of GDS and board appointee serve as directors and officers of Management HoldCo., GDS Investment Company, GDS Beijing and GDS Shanghai and their subsidiaries. This restructuring could reduce risk by allocating ownership of the VIEs among a larger number of individual management shareholders, and strengthen corporate governance with the establishment of the board of directors in the VIEs and its subsidiaries. This restructuring could also create a more stable ownership structure by avoiding reliance on a single or small number of natural persons, and by buffering the ownership of the VIEs with an additional layer of legal entities, creating an institutional structure that is tied to the Company's management philosophy and culture. VIE Agreements were entered into among GDS Beijing, GDS Shanghai, Management HoldCo, its shareholders and GDS Investment Company. The following is a summary of the contractual VIE Agreements entered among GDS Investment Company, GDS Beijing, GDS Shanghai, Management HoldCo and its shareholders. Equity Interest Pledge Agreements. Shareholder Voting Rights Proxy Agreements. Exclusive Technology License and Service Agreements. Intellectual Property Rights License Agreements. GDS Shanghai. This agreement can only be early terminated by prior mutual consent of the parties and need to be renewed upon GDS Investment Company's unilateral request. Exclusive Call Option Agreements. Loan Agreements. thirty Under the terms of the VIE Agreements, the Company has (i) the right to receive service fees on a yearly basis at an amount equivalent to all of the net profits of the VIEs under the exclusive technology license and services agreements when such services are provided; (ii) the right to receive all dividends declared by the VIEs and the right to all undistributed earnings of the VIEs; (iii) the right to receive the residual benefits of the VIEs through its exclusive option to acquire 100% of the equity interests in the VIEs, to the extent permitted under PRC law; and (iv) the right to require each of the shareholder of the VIEs to appoint the PRC citizen(s) as designated by GDS Investment Company to act as such shareholder 's exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of the VIEs requiring shareholder approval, disposing of all or part of the shareholder 's equity interest in the VIEs, and appointing directors and executive officers. In accordance with Accounting Standards Codification (“ASC”) 810-10-25-38A, the Company has a controlling financial interest in the VIEs because the Company has (i) the power to direct activities of the VIEs that most significantly impact the economic performance of the VIEs; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIEs that could potentially be significant to the VIEs. The terms of the VIE Agreements and the Company’s financial support to the VIEs were considered in determining that the Company is the primary beneficiary of the VIEs. Accordingly, the financial statements of the VIEs are consolidated in the Company’s consolidated financial statements. Under the terms of the VIE Agreements, the VIEs’ equity holders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Company. All of the equity (net assets) or deficits (net liabilities) and net income (loss) of the VIEs are attributed to the Company. The Company has been advised by its PRC legal counsel that each of the VIE agreements is valid, binding and enforceable in accordance with its terms and applicable PRC laws and the ownership structure of the VIEs does not violate applicable PRC Laws. However, there are substantial uncertainties regarding the interpretation and application of PRC laws and future PRC laws and regulations. There can be no assurance that the PRC authorities will take a view that is not contrary to or otherwise different. If the current ownership structure of the Company and the VIE Agreements are determined to be in violation of any existing or future PRC laws and regulations, the PRC government could: ● Levy fines on the Company or confiscate income of the Company; ● Revoke or suspend the VIEs' business or operating licenses; ● Discontinue or place restrictions or onerous conditions on VIE's operations; ● Require the Company to discontinue their operations in the PRC; ● Require the Company to undergo a costly and disruptive restructuring; ● Take other regulatory or enforcement actions that could be harmful to the Company's business. The imposition of any of these government actions could result in the termination of the VIE agreements, which would result in the Company losing the (i) ability to direct the activities of the VIEs and (ii) rights to receive substantially all the economic benefits and residual returns from the VIEs and thus result in the deconsolidation of the VIEs in the Company's consolidated financial statements. The following tables set forth the financial statement balances and amounts of the VIEs and their subsidiaries included in the consolidated financial statements after the elimination of intercompany balances and transactions among VIEs and their subsidiaries, including the liabilities with recourse to the primary beneficiary, which represented the borrowings guaranteed by GDS Holdings. As of December 31, 2019 June 30, 2020 Assets Current assets Cash 730,960 888,353 Accounts receivable, net of allowance for doubtful accounts 858,764 1,278,630 VAT recoverable 46,817 45,870 Prepaid expenses 39,124 55,175 Other current assets 32,929 45,152 Total current assets 1,708,594 2,313,180 Property and equipment, net 2,911,727 2,834,443 Intangible assets, net 159,860 149,278 Operating lease right-of-use assets 91,329 169,556 Deferred tax assets 34,157 39,486 Restricted cash 29,508 49,987 VAT recoverable 136,011 123,264 Other non-current assets 75,873 98,761 Total assets 5,147,059 5,777,955 Liabilities Current liabilities Short-term borrowings and current portion of long-term borrowings 493,614 536,023 Accounts payable 181,448 243,637 Accrued expenses and other payables 160,401 199,029 Deferred revenue 68,003 52,290 Operating lease liabilities, current 31,869 41,576 Finance lease and other financing obligations, current 125,318 27,339 Total current third-party liabilities 1,060,653 1,099,894 Long-term borrowings, excluding current portion 1,335,084 1,289,454 Operating lease liabilities, non-current 66,387 133,719 Finance lease and other financing obligations, non-current 921,965 986,301 Deferred tax liabilities 76,297 81,302 Other long-term liabilities 29,950 20,496 Total third-party liabilities 3,490,336 3,611,166 Amounts due to GDS Holdings and its non-VIE subsidiaries, net 1,534,768 1,957,479 Total liabilities 5,025,104 5,568,645 As of December 31, 2019 and June 30, 2020, accounts receivable of RMB83,468 and RMB85,870, respectively, and property and equipment of RMB114,344 and RMB150,800, respectively, of VIEs were pledged solely to secure banking borrowings of VIEs. Net revenue, net income, operating, investing and financing cash flows of the VIEs that were included in the Company’s consolidated financial statements for the six-month periods ended June 30, 2019 and 2020 are as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Net revenue 1,837,452 2,489,175 Net income 7,036 87,354 Net cash provided by operating activities 24,371 261,379 Net cash used in investing activities (91,297) (68,734) Net cash used in financing activities (4,790) (14,773) The unrecognized revenue producing assets that are held by the VIEs comprise of internally developed software, intellectual property and trademarks which were not recorded on the Company’s consolidated balance sheets as they do not meet all the capitalization criteria. Costs recognized by the VIEs for outsourcing and other services provided by other entities within the Company were RMB921,386 (unaudited) and RMB1,319,663, respectively for the six-month periods ended June 30, 2019 and 2020, net of the services provided to other entities within the Company. These inter-company transactions are eliminated in the consolidated financial statements. |
Use of estimates | (b) Use of estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of long-lived assets, the fair values of assets acquired and liabilities assumed and the consideration transferred in a business combination, the fair value of the reporting unit for the goodwill impairment test, the allowance for doubtful accounts receivable, the valuation of derivatives, the realization of deferred income tax assets, the fair value of share-based compensation awards, the recoverability of long-lived assets, valuation of right-of-use assets and the fair value of the asset retirement obligation. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements. |
Cash and cash equivalents | (c) Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company does not have any cash equivalents as of December 31, 2019 and June 30, 2020. |
Restricted cash | (d) Restricted cash Restricted cash represents amounts held by banks, which are not available for the Company’s use, as security for bank borrowings, related interests and certain special capital expenditures. Upon repayment of bank borrowings and the related interests, the deposits are released by the bank and available for general use by the Company. |
Fair value of financial instruments | (e) Fair value of financial instruments The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels (Note 16 to the consolidated financial statements): ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. |
Contract balances | (f) Contract balances The timing of revenue recognition, billings and cash collections result in accounts receivable, contract assets and contract liabilities (i.e. deferred revenue). Accounts receivable are recorded at the invoice amount, net of an allowance for doubtful account and is recognized in the period when the Company has transferred products or provided services to its customers and when its right to consideration is unconditional. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. Prior to the adoption of ASC 326, Financial Instruments – Credit Loss A contract asset exists when the Company has transferred products or provided services to its customers but customer payment is contingent upon satisfaction of additional performance obligations. Contract assets are recorded in other current assets and other assets in the consolidated balance sheet. Deferred revenue (a contract liability) is recognized when the Company has an unconditional right to a payment before it transfers goods or services to customers. |
Equity Method Investments | (g) Equity Method Investments The Company’s investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control are generally accounted for under the equity method of accounting, as the Company concluded it does not have control, but has the ability to exercise significant influence over the investees. Equity method investments are initially measured at cost, and are subsequently adjusted for cash contributions, distributions and the Company’s share of the income and losses of the investees. The Company records its equity method investment in other non-current assets in the consolidated balance sheet. The Company’s proportionate share of the income or loss from its equity method investment are recorded in others, net in the consolidated statement of operations. The Company reviews its investment periodically to determine if any investment may be impaired considering both qualitative and quantitative factors that may have a significant impact on the investees’ fair value. The Company did not record any impairment charges related to its equity method investment for the six-month periods ended June 30, 2019 and 2020. Equity method investment is recorded in other non-current assets on the consolidated balance sheets. |
Property and equipment | (h) Property and equipment Property and equipment are carried at cost less accumulated depreciation and any recorded impairment. Property and equipment acquired under finance leases are initially recorded at the present value of minimum lease payments. Gains or losses arising from the disposal of an item of property and equipment are determined based on the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of disposal. The estimated useful lives are presented below. Land Remaining lease terms Buildings Shorter of the lease term and 30 years Data center equipment - Machinery 10 - 20 years - Other equipment 3 - 5 years Leasehold improvement Shorter of the lease term and the estimated useful lives of the assets Furniture and office equipment 3 - 5 years Vehicles 5 years Construction in progress primarily consists of the cost of data center buildings and the related construction expenditures that are required to prepare the data center buildings for their intended use. No depreciation is provided in respect of construction in progress until it is substantially completed and ready for its intended use. Once a data center building is ready for its intended use and becomes operational, construction in progress is transferred to the respective category of property and equipment and is depreciated over the estimated useful life of the underlying assets. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets. For assets acquired under a finance lease, the assets are amortized in a manner consistent with the Company’s normal depreciation policy for owned assets if the lease transfers ownership to the Company by the end of the lease term or contains a bargain-purchase-option. Otherwise, assets acquired under a finance lease are amortized over the lease term. |
Long-lived assets held for sale | (i) Long-lived assets held for sale Long-lived assets are classified as held-for-sale if: (1) the Company has committed to a plan to sell the assets that are available for sale in its present condition, including initiating actions to complete the sale that is probable to qualify for as a completed sale within one year; (2) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn; (3) the assets are being marketed for sale at a price that is reasonable in related to its current value. Long-lived assets held for sale are recorded at the lower of carrying value and fair value less cost to sell. A loss shall be recognized for any initial or subsequent write-down to fair-value less cost to sell. Long-lived assets held for sale are not depreciated while classified as held for sale. |
Leases | (j) Leases The Company is a lessee in several non-cancellable operating leases and finance leases, primarily for data centers, lands, offices and other equipment. The Company adopted ASC 842 on January 1, 2019, using a modified retrospective method. The Company determines if an arrangement is or contains a lease at its inception. The Company recognizes lease liabilities and right-of-use (“ROU”) assets at lease commencement date. Lease liabilities are initially and subsequently measured at the present value of unpaid lease payments at the lease commencement date and is subsequently measured at amortized cost using the effective-interest method. Since most of the Company’s leases do not provide an implicit rate, the Company uses its own incremental borrowing rate on a collateralized basis in determining the present value of unpaid lease payments. ROU assets are initially measured at cost, which consist of (i) initial measurement of the lease liability; (ii) lease payments made to the lessor at or before the commencement date less any lease incentives received; and (iii) initial direct costs incurred by the Company. Variable lease payments are excluded from the measurement of ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. For operating leases, the Company recognizes a single lease cost on a straight-line basis over the remaining lease term. For finance leases, the ROU assets are subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term. Amortization of the ROU assets are recognized and presented separately from interest expense on the lease liability. ROU assets for operating and finance leases are periodically reduced by impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment – Overall Prior to the adoption of ASC 842, Leases The Company has elected not to recognize ROU assets and lease liabilities for short-term leases (i.e. leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise). The Company records an asset and related financing obligation for the estimated construction costs under build-to-suit lease arrangements where it controls the asset during construction. Upon completion of the construction and commencement of the lease terms, the Company assesses whether these arrangements qualify for sales recognition under the deemed sale-leaseback transaction. If the arrangements do not qualify for sales recognition under the sale-leaseback accounting guidance, the Company continues to be the deemed owner of the build-to-suit assets for financial reporting purposes. The Company keeps the construction costs of the assets on its balance sheet. In addition, lease payments less the portion considered to be interest expense decrease the financing liability. If a lease is modified and that modification is not accounted for as a separate contract, the classification of the lease is reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date. |
Asset retirement costs | (k) Asset retirement costs The Company’s asset retirement obligations are primarily related to its data center buildings, of which the majority are leased under long-term arrangements, and, in certain cases, are required to be returned to the landlords in their original condition. The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred. The corresponding asset retirement costs are capitalized as part of the cost of leasehold improvements and are depreciated over the shorter of the asset or the term of the lease subsequent to the initial measurement. The Company accretes the liability in relation to the asset retirement obligations over time and the accretion expense is recorded in cost of revenue. Asset retirement obligations are recorded in other long-term liabilities. The following table summarizes the activity of the asset retirement obligation liability: Asset retirement obligations as of December 31, 2019 52,441 Additions 8,438 Accretion expense 1,840 Asset retirement obligations as of June 30, 2020 62,719 |
Intangible assets | (l) Intangible assets Intangible assets acquired in the acquisitions comprised of customer relationships and licenses. The weighted-average amortization period by major intangible asset class is as follows: Customer relationships 5-15 years Licenses 20 years Customer relationships represent the orders, backlog and customer lists, which arise from contractual rights or through means other than contracts. Customer relationships are amortized using a straight-line method, as the pattern in which the economic benefits of the intangible assets are consumed or used up cannot be reliably determined. The amortization period of customer relationships is determined based on the remaining contractual period of the contracts with the customers at the time of acquisition and an estimate of the contract renewal period. Licenses are amortized using a straight-line method over the estimated beneficial period. The amortization period of licenses is determined based on the terms of those licenses. |
Prepaid land use rights | (m) Prepaid land use rights The land use rights represent the amounts paid and relevant costs incurred for the rights to use land in the PRC and Hong Kong SAR acquired before the adoption of ASC 842, and are carried at cost less accumulated amortization. Amortization is provided on a straight-line basis over the remaining terms of the land use right ranging from 27 to 42 years. |
Goodwill | (n) Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in the acquisition that are not individually identified and separately recognized. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the stock prices, business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill impairment test requires judgment, including the identification of the reporting unit, assignment of assets and liabilities to the reporting unit, assignment of goodwill to the reporting unit, and determination of the fair value of each reporting unit. The Company has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value prior to performing the goodwill impairment test. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the goodwill impairment test is not required. If the goodwill impairment test is required, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. In assessing the qualitative factors, the Group considered the impact of key factors such as changes in the general economic conditions including the impact of COVID-19, changes in industry and competitive environment, stock price, actual revenue performance compared to previous years, and cash flow generation. Based on the results of the qualitative assessment completed as of June 30, 2020, there were no indicators of impairment. Therefore, no impairment charge was recognized for the six-month period ended June 30, 2020. |
Impairment of long-lived assets | (o) Impairment of long-lived assets Long-lived assets (primarily including property and equipment, operating lease right-of-use assets and prepaid land use rights) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived assets or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. For the purposes of impairment testing of long-lived assets, the Company has concluded that an individual data center is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When there were circumstances that require a long-lived asset or asset group for certain data centers be tested for possible impairment, the Company compared undiscounted cash flows generated by that asset or asset group to its carrying amount. As a result of the test, the carrying amount of the long-lived assets or asset group is recoverable on an undiscounted cash flow basis. Accordingly, no impairment losses were recorded for long-lived assets for the six-month period ended June 30, 2020. |
Value-added-tax ("VAT") | (p) Value-added-tax (“VAT”) Entities that are VAT general taxpayers are permitted to offset qualified input VAT paid to suppliers against their output VAT upon receipt of appropriate supplier VAT invoices on an entity by entity basis. When the output VAT exceeds the input VAT, the difference is remitted to tax authorities, usually on a monthly basis; whereas when the input VAT exceeds the output VAT, the difference is treated as VAT recoverable which can be carried forward indefinitely to offset future net VAT payables. VAT related to purchases and sales which have not been settled at the balance sheet date is disclosed separately as an asset and liability, respectively, in the consolidated balance sheets. As of December 31, 2019 and June 30, 2020, the Company recorded a VAT recoverable of RMB129,994 and RMB114,575 in current assets, and RRMB888,483 and RMB1,129,440 in non-current assets, respectively. The Company also recorded VAT payables of RMB7,886 and RMB16,663 in accrued expenses and other payables, respectively, in the consolidated balance sheets as of December 31, 2019 and June 30, 2020. |
Derivative financial instruments | (q) Derivative financial instruments Derivative financial instruments are recognized initially at fair value. At the end of each reporting period, the fair value is remeasured. The gain or loss on remeasurement to fair value is recognized immediately in profit or loss. The Company entered into interest rate swap and foreign currency forward contracts primarily for the purpose to manage the interest rate risk for the long-term borrowings. The Company has elected not to apply hedge accounting to these derivative instruments and recognized all derivatives on the Company’s consolidated balance sheets at fair value. The Company estimates the fair value of its interest rate swap and foreign currency forward contracts using a pricing model based on market observable inputs. Fair value gains or losses associated with interest rate swap and foreign currency forward contracts are recorded within interest expenses and foreign exchange gain (loss) in the Company’s consolidated statements of operations. Cash received or paid for realized gains or losses associated with interest rate swap and foreign currency forward contracts are included in operating cash flows in the consolidated statements of cash flows. For further information on derivative financial instruments, see Note 15 below. |
Commitment and contingencies | (r) Commitment and contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. |
Revenue recognition | (s) Revenue recognition The Company recognizes revenue as the Company satisfies a performance obligation by transferring control over a good or service to a customer. For each performance obligation satisfied over time, the Company recognizes revenue over time by measuring the progress toward complete satisfaction of that performance obligation. If the Company does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time. Revenue is measured as the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. For contracts with customers that contain multiple performance obligations, the Company accounts for individual performance obligations separately if they are distinct or as a series of distinct obligations if the individual performance obligations meet the series criteria. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The transaction price is allocated to the separate performance obligation on a relative standalone selling price basis. The standalone selling price is determined based on overall pricing objectives, taking into consideration market conditions, geographic locations and other factors. The Company derives revenue primarily from the delivery of (i) colocation services; (ii) managed services, including managed hosting services and managed cloud services. The remainder of the Company’s revenue is from IT equipment sales that are either sold on a stand-alone basis or bundled in a managed service contract arrangement and consulting services. Colocation services are services where the Company provides space, power and cooling to customers for housing and operating their IT system equipment in the Company’s data centers. Managed hosting services are services where the Company provides outsourced services to manage the customers’ data center operations, including data migration, IT operations, security and data storage. Managed cloud services are services where the Company offers direct private connection to major cloud platforms, an innovative service platform for managing hybrid clouds and, where required, the resale of public cloud services. Certain contracts with customers for colocation services and managed services provide for variable considerations that are primarily based on the usage of such services. Revenues on such contracts are recognized based on the agreed usage-based fees as the actual services are rendered throughout the contract term. Certain contracts with remaining customers provide for a fixed consideration over the contract service period. Revenue on such contracts are recognized on a straight-line basis over the term of the contract. In certain colocation and managed hosting service contracts, the Company agrees to charge customers for their actual power consumption. Relevant revenue is recognized based on actual power consumption during each period. In certain other colocation and managed hosting service contracts, the Company specifies a fixed power consumption limit each month for customers. If a customer ’s actual power consumption is below the limit, no additional fee is charged. If the actual power consumption is above the limit, the Company charges the customer additional power consumption fees calculated based on the portion of actual power consumption exceeding the limit, multiplied by a fixed unit price, which is determined based on market price, without providing the customer with any rights to acquire additional goods or services. Accordingly, relevant revenue is recognized each month based on actual additional power consumption fees. The Company’s colocation service and managed service contracts with customers contain both lease and non-lease components. The Company elected to adopt the practical expedient which allows lessors to combine lease and non-lease components and account for them as one component if i) they have the same timing and pattern of transfer; and ii) the lease component, if accounted for separately, would be classified as an operating lease. The Company elected to apply the practical expedient on the contracts that meet the conditions. In addition, the Company has performed a qualitative analysis to determine that the non-lease component is the predominant component of its revenue stream as the customer would ascribe more value to the services provided rather than to the lease component. Therefore, the combined component is accounted for in accordance with the current revenue accounting guidance (“Topic 606”). For contracts that do not meet the conditions required to adopt the practical expedient, the lease component is accounted for in accordance with the current lease accounting guidance (“Topic 842”), which is immaterial for the six-month periods ended June 30, 2019 and 2020. The Company has elected to apply the practical expedient on a prospective basis. Revenue recognized for colocation or managed hosting and cloud services delivered prior to billing is recorded within accounts receivable. The Company generally bills the customer on a monthly or quarterly basis in arrears. Cash received in advance from customers prior to the delivery of the colocation or managed hosting and cloud services is recorded as deferred revenue. The sale of IT equipment is recognized when the customer obtains control of the equipment, which is typically when delivery has occurred, the customer accepts the equipment and the Company has no performance obligation after the delivery. In certain managed service contracts, the Company sells and delivers IT equipment such as servers and computer terminals prior to the delivery of the services. Since sale of equipment can be distinguished and is separately identifiable from other promises in the contract and it is distinct within the context of the contract, the sale of equipment is considered a separate performance obligation. Accordingly, the contract consideration is allocated to the equipment and the managed services based on their relative standalone selling prices. Consulting services are provided to customers for a fixed amount over the service period, usually less than one year. The Company recognizes revenues from consulting services over the period when the services were provided, since customers simultaneously receive and consume the benefit of the services. The Company uses the input method based on the pattern of service provided to the customers. Revenue is generally recognized on a gross basis as the Company is primarily responsible for fulfilling the contract, assumes inventory risk and has discretion in establishing the price when selling to the customer. To the extent the Company does not meet the criteria for recognizing revenue on a gross basis, the Company records the revenue on a net basis. |
Cost of revenues | (t) Cost of revenues Cost of revenues consists primarily of utility costs, depreciation of property and equipment, rental costs, labor costs and other costs directly attributable to the provision of the service revenue. |
Research and development and advertising costs | (u) Research and development and advertising costs Research and development and advertising costs are expensed as incurred. Research and development costs amounted to RMB8,839 (unaudited) and RMB18,987, respectively for the six-month periods ended June 30, 2019 and 2020. Research and development costs consist primarily of payroll and related personnel costs for developing or significantly improving the Company’s services and products. Advertising costs amounted to RMB2,308 (unaudited) and RMB1,669, respectively for the six-month periods ended June 30, 2019 and 2020. |
Government grants | (v) Government grants Government grants are recognized when received and when all the conditions for their receipt have been met. Subsidies that compensate the Company for expenses incurred are recognized as a reduction of expenses in the consolidated statements of operations. Subsidies that are not associated with expenses are recognized as other income. Subsidies for the acquisition of property and equipment are recorded as a liability until earned and then depreciated over the useful life of the related assets as a reduction of the depreciation charges. Subsidies for obtaining the rights to use land are recorded as a liability until earned and then amortized over the land use right period as a reduction of the amortization charges of the related land use rights. In 2010 and 2011, the Company received government subsidies that required the Company to operate in a particular area for a certain period. The Company recorded the subsidies in other long-term liabilities when the subsidies were received and subsequently recognized as government subsidy income ratably over the period the Company is required to operate in the area. In 2017, the Company received government subsidies that required the Company to pass certain inspection on the related project. The Company recorded such subsidies in other long-term liabilities when received, which are reclassified to accrued expenses and other payables when the inspection is expected to be completed within one year, and will be recorded as government subsidy income when the conditions are met. As of December 31, 2019 and June 30, 2020, deferred government grants of RMB6,507 and RMB6,196 are recorded in other long-term liabilities, respectively. Deferred government grants of RMB6,003 and RMB172 are recorded in accrued expenses and other payables, respectively, in the consolidated balance sheets as of December 31, 2019 and June 30, 2020. |
Capitalized interest | (w) Capitalized interest A reconciliation of total interest costs to “Interest expenses” as reported in the consolidated statements of operations for six-month periods ended June 30, 2019 and 2020 is as follows: Six-month periods ended June 30, 2019 2020 (unaudited) Total interest costs 510,568 598,296 Less: interest costs capitalized (43,877) (29,001) Interest expenses 466,691 569,295 Interest costs that are directly attributable to the construction of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset. The capitalization of interest costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, interest costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalization of interest costs is ceased when the asset is substantially complete and ready for its intended use. |
Debt issuance costs | (x) Debt issuance costs Debt issuance costs are capitalized and are amortized over the life of the related debts based on the effective interest method. Such amortization is included as a component of interest expense. Unamortised debt issuance costs of RMB273,822 and RMB277,563 are presented as a reduction of debt as of December 31, 2019 and June 30, 2020, respectively. |
Income tax | (y) Income tax Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. |
Share-based compensation | (z) Share-based compensation The Company accounts for the compensation cost from share-based payment transactions with employees based on the grant-date fair value of the equity instrument issued. The grant-date fair value of the award is recognized as compensation expense, net of forfeitures, over the period during which an employee is required to provide service in exchange for the award, which is generally the vesting period. When no future services are required to be performed by the employee in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the award is expensed on the grant date. The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date. Awards granted to employees with performance conditions attached are measured at fair value on the grant date and are recognized as the compensation expenses in the period and thereafter when the performance goal becomes probable to achieve. Awards granted to employees with market conditions attached are measured at fair value on the grant date and are recognized as the compensation expenses over the estimated requisite service period, regardless of whether the market condition has been satisfied if the requisite service period is fulfilled. The Company recognizes the estimated compensation cost of service-based restricted share based on the fair value of its ordinary shares on the date of the grant. The Company recognizes the compensation cost, net of forfeitures, over its respective vesting term. The Company recognizes the estimated compensation cost of performance-based restricted share based on the fair value of its ordinary shares on the date of the grant. The rewards are earned upon attainment of identified performance goals. The Company recognizes the compensation cost, net of forfeitures, over the performance period. The Company also adjusts the compensation cost based on the probability of performance goal achievement at the end of each reporting period. The Company accounts for forfeitures when they occur. Compensation cost previously recognized are reversed in the period the award is forfeited, for an award that is forfeited before completion of the requisite service period. Share-based payment transactions with nonemployees in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of either the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instrument is reached. For further information on share-based compensation, see Note 18 below. |
Employee benefits | (aa) Employee benefits Pursuant to relevant PRC regulations, the Company is required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 28% to 49% on a standard salary base as determined by local social security bureau. Contributions to the defined contribution plans are charged to the consolidated statements of operations when the related service is provided. |
Foreign currency translation and foreign currency risks | (bb) Foreign currency translation and foreign currency risks The functional currency of GDS Holdings is the USD (“US$”), whereas the functional currency of its subsidiaries and consolidated VIEs in PRC, subsidiaries in Hong Kong SAR and subsidiaries in Singapore is the RMB, Hong Kong dollar (“HKD”) and Singapore dollar (“SGD”), respectively. The reporting currency of the Company is RMB as the major operations of the Company are within the PRC. Transactions denominated in currencies other than the functional currency are re- measured into the functional currency at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical costs in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are recognized in profit or loss and are reported in foreign currency exchange gain (loss) on a net basis. The results of foreign operations are translated into RMB at the exchange rate as of the balance sheet date for assets and liabilities, the average daily exchange rate for each month for income and expense items and the historical exchange rates for equity accounts. Translation gains and losses are recorded in other comprehensive income and accumulated in the translation adjustment component of equity until the sale or liquidation of the foreign entity. The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PRC government, controls the conversion of RMB to foreign currencies. The value of the RMB is subject to changes of central government policies and international economic and political developments affecting supply and demand in the China foreign exchange trading system market. The Company’s cash and restricted cash denominated in RMB amounted to RMB2,119,758 and RMB2,693,980 as of December 31, 2019 and June 30, 2020, respectively. As of June 30, 2020, the Company’s cash and restricted cash were deposited in major financial institutions located in PRC, Hong Kong SAR, US and Singapore, and were denominated in the following currencies: RMB USD HKD JPY EUR SGD In PRC 2,657,679 71,653 — — — — In Hong Kong SAR 36,301 17,641 210,906 30,909 146 — In US — 630,873 — — — — In Singapore — 4,258 — — — 1,605 Total in original currency 2,693,980 724,425 210,906 30,909 146 1,605 RMB equivalent 2,693,980 5,128,567 192,641 2,034 1,166 8,155 |
Concentration of credit risk | (cc) Concentration of credit risk Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalent, restricted cash, and accounts receivable. The Company’s investment policy requires cash and cash equivalents and restricted cash to be placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. The Company regularly evaluates the credit standing of the counterparties or financial institutions. The Company conducts credit evaluations on its customers prior to delivery of goods or services. The assessment of customer creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site visits by senior management. Based on this analysis, the Company determines what credit terms, if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Company will not deliver the services or sell the products to the customer or require the customer to pay cash, post letters of credit to secure payment or to make significant down payments. Historically, credit losses on accounts receivable have been insignificant. |
Earnings (loss) per share | (dd) Earnings (loss) per share Basic earnings (loss) per ordinary share is computed by dividing net income (loss) attributable to the Company’s ordinary shareholders by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two-class method, net income (loss) attributable to the Company’s ordinary shareholders is allocated between ordinary shares and other participating securities based on participating rights in undistributed earnings. The Company’s redeemable preferred shares (Note 14) are participating securities since the holders of these securities participate in dividends on the same basis as ordinary shareholders. These participating securities are not included in the computation of basic loss per ordinary share in periods when the Company reports net loss, because these participating security holders have no obligation to share in the losses of the Company. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to the Company’s ordinary shareholders as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary and dilutive ordinary share equivalents outstanding during the year. Ordinary share equivalents include the ordinary shares issuable upon the exercise of the outstanding share options (using the treasury stock method) and conversion of redeemable preferred shares and convertible bonds (using the as-if- converted method). Potential dilutive securities are not included in the calculation of diluted earnings (loss) per share if the impact is anti-dilutive. |
Changes in accounting principle | (ee) Changes in accounting principle 1) The Company adopted ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement on January 1, 2020. This ASU changes the fair value measurement disclosure requirements of ASC 820. Under this ASU, key provisions include new, eliminated and modified disclosure. The adoption of this ASU does not have a material impact on the consolidated financial statements. 2) The Company adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment on January 1, 2020. This ASU is to simplify the subsequent measurement of goodwill. The ASU eliminates step 2 from the goodwill impairment test and the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU is applied on a prospective basis. The adoption of this standard does not have impact on the Company’s consolidated financial statements. 3) The Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , and subsequent amendments to the initial guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02, collectively referred to as “ASC 326” on January 1, 2020 using the modified retrospective approach. ASC 326 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASC 326 eliminates the probable initial recognition threshold in current GAAP and, instead, reflects an entity’s current estimate of all expected credit losses. This adoption did not have material impact on the Company’s consolidated financial statements. |
Recently Issued Accounting Standards | (ff) Recently Issued Accounting Standards In December 2019, the FASB issued ASU 2019-12, Income Tax (Topic 740), Simplifying the Accounting for Income Taxes In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of financial statement balances and amounts of the VIEs and their subsidiaries and schedule of net revenue and net income, operating, investing and financing cash flows of VIEs | As of December 31, 2019 June 30, 2020 Assets Current assets Cash 730,960 888,353 Accounts receivable, net of allowance for doubtful accounts 858,764 1,278,630 VAT recoverable 46,817 45,870 Prepaid expenses 39,124 55,175 Other current assets 32,929 45,152 Total current assets 1,708,594 2,313,180 Property and equipment, net 2,911,727 2,834,443 Intangible assets, net 159,860 149,278 Operating lease right-of-use assets 91,329 169,556 Deferred tax assets 34,157 39,486 Restricted cash 29,508 49,987 VAT recoverable 136,011 123,264 Other non-current assets 75,873 98,761 Total assets 5,147,059 5,777,955 Liabilities Current liabilities Short-term borrowings and current portion of long-term borrowings 493,614 536,023 Accounts payable 181,448 243,637 Accrued expenses and other payables 160,401 199,029 Deferred revenue 68,003 52,290 Operating lease liabilities, current 31,869 41,576 Finance lease and other financing obligations, current 125,318 27,339 Total current third-party liabilities 1,060,653 1,099,894 Long-term borrowings, excluding current portion 1,335,084 1,289,454 Operating lease liabilities, non-current 66,387 133,719 Finance lease and other financing obligations, non-current 921,965 986,301 Deferred tax liabilities 76,297 81,302 Other long-term liabilities 29,950 20,496 Total third-party liabilities 3,490,336 3,611,166 Amounts due to GDS Holdings and its non-VIE subsidiaries, net 1,534,768 1,957,479 Total liabilities 5,025,104 5,568,645 Six-month periods ended June 30, 2019 2020 (unaudited) Net revenue 1,837,452 2,489,175 Net income 7,036 87,354 Net cash provided by operating activities 24,371 261,379 Net cash used in investing activities (91,297) (68,734) Net cash used in financing activities (4,790) (14,773) |
Schedule of estimated useful lives of property and equipment | Land Remaining lease terms Buildings Shorter of the lease term and 30 years Data center equipment - Machinery 10 - 20 years - Other equipment 3 - 5 years Leasehold improvement Shorter of the lease term and the estimated useful lives of the assets Furniture and office equipment 3 - 5 years Vehicles 5 years |
Schedule of asset retirement obligations | Asset retirement obligations as of December 31, 2019 52,441 Additions 8,438 Accretion expense 1,840 Asset retirement obligations as of June 30, 2020 62,719 |
Schedule of weighted-average amortization period of acquired intangible assets | Customer relationships 5-15 years Licenses 20 years |
Schedule of reconciliation of total interest costs to "Interest expenses" as reported in the consolidated statements of operations | Six-month periods ended June 30, 2019 2020 (unaudited) Total interest costs 510,568 598,296 Less: interest costs capitalized (43,877) (29,001) Interest expenses 466,691 569,295 |
Schedule of cash and restricted cash deposited in major financial institutions located in PRC, Hong Kong SAR, US and Singapore | RMB USD HKD JPY EUR SGD In PRC 2,657,679 71,653 — — — — In Hong Kong SAR 36,301 17,641 210,906 30,909 146 — In US — 630,873 — — — — In Singapore — 4,258 — — — 1,605 Total in original currency 2,693,980 724,425 210,906 30,909 146 1,605 RMB equivalent 2,693,980 5,128,567 192,641 2,034 1,166 8,155 |
CASH AND RESTRICTED CASH (Table
CASH AND RESTRICTED CASH (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of reconciliation of cash and restricted cash in the consolidated balance sheets to the amounts in the consolidated statements of cash flows | As of December 31, June 30, 2019 2020 Cash 5,810,938 7,742,082 Restricted cash - current assets 34,299 112,756 Restricted cash - non-current assets 128,025 171,705 Total cash and restricted cash shown in the consolidated statements of cash flows 5,973,262 8,026,543 |
CONTRACT BALANCES (Tables)
CONTRACT BALANCES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of accounts receivable, net | As of December 31, June 30, 2019 2020 Accounts receivable 881,177 1,388,987 Less: allowance for doubtful accounts (133) (452) Accounts receivable, net 881,044 1,388,535 Including: - Current portion 879,962 1,388,535 - Non-current portion 1,082 — |
Schedule of allowance for doubtful accounts | Six-month periods ended June 30, 2019 2020 (unaudited) Balance at the beginning of the period 241 133 Allowance made during the period 81 319 Balance at the end of the period 322 452 |
Schedule of deferred revenue | Deferred revenue Beginning balance as of January 1, 2020 105,735 Decrease (31,044) Closing balance as of June 30, 2020 74,691 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of property and equipment | As of December 31, 2019 June 30, 2020 At cost: Land 855,310 877,640 Buildings 5,964,048 8,198,521 Data center equipment 5,567,606 8,322,958 Leasehold improvement 6,111,733 6,955,273 Furniture and office equipment 61,974 74,858 Vehicles 4,115 4,141 18,564,786 24,433,391 Less: Accumulated depreciation (2,580,320) (3,267,380) 15,984,466 21,166,011 Construction in progress 3,200,173 3,376,940 Property and equipment, net 19,184,639 24,542,951 |
Schedule of depreciation of property and equipment | Six-month periods ended June 30, 2019 2020 (unaudited) Cost of revenue 476,361 631,329 General and administrative expenses 4,405 35,207 Research and development expenses 522 1,531 481,288 668,067 |
INTANGIBLE ASSETS, NET (Tables)
INTANGIBLE ASSETS, NET (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of intangible assets | As of Note December 31, 2019 June 30, 2020 Customer relationships 8 547,322 693,500 Licenses 6,000 6,000 553,322 699,500 Less: accumulated amortization (158,694) (141,529) Intangible assets, net 394,628 557,971 |
Schedule of estimated future amortization expense | Twelve-month periods ending June 30, 2021 76,864 2022 76,924 2023 76,782 2024 71,516 2025 65,814 Thereafter 190,071 Total 557,971 |
PREPAID LAND USE RIGHTS (Tables
PREPAID LAND USE RIGHTS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of prepaid land use rights | As of December 31, June 30, 2019 2020 Prepaid land use rights 782,319 797,134 Less: Accumulated amortization (35,132) (49,454) Prepaid land use rights, net 747,187 747,680 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
BUSINESS COMBINATIONS | |
Schedule of movement of goodwill | As of June 30, 2020 Balance at the beginning of the period 1,905,840 Addition during the period 503,485 Balance at end of period 2,409,325 |
Schedule of the identifiable assets acquired and liabilities assumed in the business combination | Note Fair value of consideration 847,586 Effective settlement of pre-existing relationship upon consolidation (i) 34,477 Recognized amounts of identifiable assets acquired and liabilities assumed: Cash (2,349) Accounts receivable (81,027) Property and equipment (ii) (1,971,432) Operating lease ROU assets (94,821) Identifiable intangible assets (iii) (191,000) Other assets (149,956) Accounts payable 727,043 Finance lease and other financing obligations, current 171,979 Operating lease liabilities, current 6,092 Finance lease and other financing obligations, non-current 1,062,114 Operating lease liabilities, non-current 92,360 Deferred tax liabilities 13,833 Other liabilities 38,586 Total identifiable net assets (378,578) Goodwill (iv) 503,485 Note (i):Prior to the acquisition, the Company had receivables from the target group of RMB34,477, which was effectively settled upon completion of the acquisition. Note (ii):Property and equipment acquired included properties acquired under finance lease of RMB632,427. Note (iii):Identifiable intangible assets acquired consisted of customer relationships of RMB191,000 with an estimated useful life of 7.6 years. Note (iv):Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in the acquisition. Goodwill is assigned to the design, build-out and operation of data centers reporting unit. Goodwill primarily represents the expected synergies from combining operations of the target group with those of the Company and intangible assets that do not qualify for separate recognition and is not deductible for tax purposes. In accordance with ASC 350, goodwill is not amortized but is tested for impairment. |
LOANS AND BORROWINGS (Tables)
LOANS AND BORROWINGS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of borrowings | As of December 31, June 30, 2019 2020 Short-term borrowings 397,213 734,208 Current portion of long-term borrowings 740,524 947,579 Sub-total 1,137,737 1,681,787 Long-term borrowings, excluding current portion 8,028,473 9,337,882 Total loans and borrowings 9,166,210 11,019,669 |
Schedule of short-term borrowings | As of December 31, June 30, 2019 2020 Unsecured short-term borrowings 80,000 70,000 Secured short-term borrowings 317,213 664,208 397,213 734,208 |
Schedule of assets to secure the short-term borrowings | As of December 31, 2019 June 30, 2020 Accounts receivable (Note) 11,535 37,782 |
Schedule of long-term borrowings | As of December 31, 2019 June 30, 2020 Unsecured long-term borrowings 42,500 127,500 Secured long-term borrowings 8,726,497 10,157,961 8,768,997 10,285,461 |
Schedule of assets to secure the long-term borrowings | As of December 31, June 30, 2019 2020 Accounts receivable (Note) 508,847 911,692 Property and equipment, net 2,493,872 3,401,995 Prepaid land use rights, net 741,032 734,566 3,743,751 5,048,253 Note: The Company applied accounts receivable generated from certain data center operation as collateral to secure borrowings. |
Schedule of aggregate maturities of the long-term borrowings | Long-term borrowings Twelve-months ending June 30, 2021 947,579 2022 1,995,581 2023 2,094,516 2024 2,258,340 2025 968,067 Thereafter 2,021,378 10,285,461 |
ACCRUED EXPENSES AND OTHER PA_2
ACCRUED EXPENSES AND OTHER PAYABLES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of accrued expenses and other payables | As of December 31, June 30, 2019 2020 Accrued interest expenses 43,776 48,795 Accrued debt issuance costs and other financing costs 28,082 53,933 Income tax payable 93,307 128,100 Other tax payable 28,259 54,519 Consideration payables for acquisitions 362,032 845,853 Deferred government grants 6,003 172 Accrued payroll and welfare benefits 97,486 75,178 Accrued professional fees 41,630 42,734 Accrued data center outsourcing service fees 17,989 6,857 Amount due to related parties 11,988 21,388 Amount due to a financial institution 34,190 112,380 Interest rate swap contracts (Note 15) 351 17,182 Other accrued operating expenses 38,020 59,484 Other payables 14,770 75,113 817,883 1,541,688 |
LEASE (Tables)
LEASE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of of lease cost | Six-month periods ended June 30, 2019 2020 (unaudited) Finance lease cost: - Amortization of right-of-use assets 103,566 169,352 - Interest on lease liabilities 144,928 192,489 Operating lease cost 50,702 85,028 Short-term lease cost 1,772 3,223 Variable lease cost (Note) — (40,189) Total lease cost 300,968 409,903 Note: During the six-month period ended June 30, 2020, the Company was granted lease concessions of RMB40,142 by certain landlords due to the effects of the COVID-19 pandemic. The lease concessions were primarily in the form of rent reduction. Such concessions were recognized as variable lease cost (credit) in the period when the concession was granted. In addition, the Company recognized variable lease cost (credit) of RMB47 in the six-month period ended June 30, 2020 for certain finance leases with floating interest rate. |
Schedule of supplemental cash flow information related to leases | Six-month periods ended June 30, 2019 2020 (unaudited) Cash paid for amounts included in measurement of lease liabilities (Note): - Operating cash flows from finance leases (119,396) (159,802) - Operating cash flows from operating leases (45,312) (62,123) - Financing cash flows from finance leases (203,911) (78,888) Non-cash information on lease liabilities arising from obtaining ROU assets - Finance leases 699,524 660,325 - Operating leases 3,770 406,853 Note: The above table does not include cash paid for purchase of land use rights and initial direct costs of leases of RMB570,821 in the six-month period ended June 30, 2020, which are included in "Payments for purchase of property and equipment and land use rights" in the consolidated statements of cash flows. |
Schedule of weighted average remaining lease term and weighted average discount rate for leases | As of December 31, 2019 June 30, 2020 Weighted average remaining lease term: - Finance leases 15.2 14.1 - Operating leases 15.6 15.9 Weighted average discount rate: - Finance leases 6.91 % 7.06 % - Operating leases 6.35 % 6.25 % |
Schedule of maturities of finance lease and other financing obligations | As of December 31, 2019 As of June 30, 2020 Total of finance Total of finance Finance Other lease and other Operating Finance Other lease and other Operating lease financing financing lease lease financing financing lease obligations obligations obligations obligations Total obligations obligations obligations obligations Total Within 1 year 502,261 32,232 534,493 97,993 632,486 545,457 164,867 710,324 140,967 851,291 After 1 year but within 2 years 399,200 37,462 436,662 72,046 508,708 521,945 233,151 755,096 123,042 878,138 After 2 years but within 3 years 399,843 72,845 472,688 64,151 536,839 553,473 306,028 859,501 101,640 961,141 After 3 years but within 4 years 414,126 69,248 483,374 64,086 547,460 569,126 291,552 860,678 101,750 962,428 After 4 years but within 5 years 429,902 65,688 495,590 64,547 560,137 610,207 276,749 886,956 105,115 992,071 After 5 years 5,905,408 163,480 6,068,888 880,855 6,949,743 7,234,194 647,305 7,881,499 1,411,770 9,293,269 Total 8,050,740 440,955 8,491,695 1,243,678 9,735,373 10,034,402 1,919,652 11,954,054 1,984,284 13,938,338 Less: total future interest (3,387,232) (121,742) (3,508,974) (478,541) (3,987,515) (4,076,294) (497,689) (4,573,983) (769,087) (5,343,070) Less: estimated construction costs — (9,127) (9,127) — (9,127) — (47,924) (47,924) — (47,924) Present value of lease and other financing obligations 4,663,508 310,086 4,973,594 765,137 5,738,731 5,958,108 1,374,039 7,332,147 1,215,197 8,547,344 Including: - Current portion 222,473 55,139 277,612 230,746 73,362 304,108 - Non-current portion 4,751,121 709,998 5,461,119 7,101,401 1,141,835 8,243,236 |
OTHER LONG-TERM LIABILITIES (Ta
OTHER LONG-TERM LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of other long-term liabilities | As of December 31, 2019 June 30, 2020 Consideration payable for acquisitions 23,062 19,655 Payables for purchase of property and equipment 231,459 185,310 Deferred revenue – non-current (Note 4) 15,419 14,865 Deferred government grants 6,507 6,196 Interest rate swap contracts (Note 15) 10,408 — Asset retirement obligations 52,441 62,719 Others 6,241 9,589 Total 345,537 298,334 |
REDEEMABLE PREFERRED SHARES (Ta
REDEEMABLE PREFERRED SHARES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of movement of the redeemable preferred shares | Redeemable preferred shares Balance at January 1, 2020 1,061,981 Accrual of redeemable preferred shares dividends 26,667 Settlement of redeemable preferred shares dividends (40,068) Foreign exchange impact 15,557 Balance at June 30, 2020 1,064,137 |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of fair values of derivatives included in the consolidated balance sheets | Consolidated balance sheets location As of December 31, 2019 June 30, 2020 Interest rate swap contracts (not designated as hedging instruments) Accrued expenses and other payables 351 17,182 Interest rate swap contracts (not designated as hedging instruments) Other long-term liabilities 10,408 — |
Schedule of location in the consolidated statements of operations and the amount of realized and unrealized gains (losses) recognized for the derivative contracts not designated as hedging instruments | Consolidated statements of operations location Six-month periods ended June 30, 2019 2020 (unaudited) Interest rate swap contracts (not designated as hedging instruments) — realized loss Interest expenses (378) (3,084) Interest rate swap contracts (not designated as hedging instruments) — unrealized loss Interest expenses (12,575) (6,180) (12,953) (9,264) |
FAIR VALUE MEASUREMENT (Tables)
FAIR VALUE MEASUREMENT (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of assets and liabilities measured at fair value on a recurring basis | Fair value measurement using Level 2 inputs As of December 31, 2019 June 30, 2020 Liabilities - Interest rate swap contracts (Note 15) 10,759 17,182 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
SHARE-BASED COMPENSATION | |
Summary of the option activity | Weighted average Weighted grant-date Number average fair value of options exercise price per option (RMB) (RMB) Options outstanding January 1, 2020 14,629,096 5.4 1.7 Exercised (13,960,096) 5.5 1.6 Options outstanding at June 30, 2020 669,000 5.5 2.9 Options vested and expect to vest at June 30, 2020 669,000 5.5 2.9 |
Summary of information with respect to stock options outstanding and stock options exercisable | Weighted average Weighted Number remaining average of shares contractual life exercise price (years) (RMB) Options outstanding and exercisable 669,000 0.8 5.5 |
Summary of the restricted share activity | Weighted average grant- Number of date fair value per share Shares (RMB) Unvested at January 1, 2020 33,357,296 22.4 Granted 100,136 46.8 Vested (3,611,936) 8.0 Forfeited (656,248) 8.2 Unvested at June 30, 2020 29,189,248 24.6 |
Summary of share-based compensation expenses | Six-month periods ended June 30, 2019 2020 (unaudited) Costs of revenue 14,858 34,439 Selling and marketing expenses 14,697 26,124 General and administrative expenses 32,509 71,527 Research and development expenses 870 1,752 Total share-based compensation expenses 62,934 133,842 |
REVENUE (Tables)
REVENUE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of Net revenue | Six-month periods ended June 30, 2019 2020 (unaudited) Colocation services 1,532,192 2,069,387 Managed service and others 343,848 497,677 Service revenue 1,876,040 2,567,064 IT equipment sales 990 15,559 Total 1,877,030 2,582,623 |
INCOME TAX (Tables)
INCOME TAX (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of operating results before income tax and the provision for income taxes by tax jurisdictions | Six-month periods ended June 30, 2019 2020 (unaudited) Loss (income) before income taxes: PRC 59,174 (46,466) Other jurisdictions 157,788 197,457 Total loss before income taxes 216,962 150,991 Current tax expenses: PRC 33,669 102,351 Total current tax expenses 33,669 102,351 Deferred tax benefits: PRC (20,852) (60,264) Total deferred tax benefits (20,852) (60,264) Total income tax expenses 12,817 42,087 |
Schedule of reconciliation of differences between PRC statutory tax rate and effective tax rate | Six-month periods ended June 30, 2019 2020 (unaudited) PRC enterprise income tax rate 25.0 % 25.0 % Non-PRC resident enterprises not subject to income tax (16.8) % (43.4) % Tax differential for entities in non-PRC jurisdiction (1.3) % (2.5) % Preferential tax rate 0.0 % (0.8) % Tax effect of current period permanent differences 0.0 % 3.3 % Non-taxable income 0.0 % 9.1 % Change in valuation allowance (17.0) % (23.4) % Return to provision adjustment 4.2 % 4.8 % (5.9) % (27.9) % |
Schedule of components of deferred tax assets and liabilities | As of December 31, 2019 June 30, 2020 Deferred tax assets: Allowance for accounts receivable 12 104 Government subsidy 3,127 1,592 Accrued expenses 27,601 35,741 Asset retirement obligation 13,110 15,680 Leases — 13,457 Net operating loss carry forwards 267,159 322,473 Total gross deferred tax assets 311,009 389,047 Valuation allowance on deferred tax assets (205,976) (246,750) Deferred tax assets, net of valuation allowance 105,033 142,297 Deferred tax liabilities: Property and equipment (171,656) (148,284) Intangible assets (97,102) (137,878) Prepaid land use rights (1,612) (1,592) Leases (9,568) — Accounts receivable (4,836) — Total deferred tax liabilities (284,774) (287,754) Net deferred tax liabilities (179,741) (145,457) Analysis as: Deferred tax assets 72,931 136,809 Deferred tax liabilities (252,672) (282,266) Net deferred tax liabilities (179,741) (145,457) |
Schedule of movement of the valuation allowance for the deferred tax assets | Six-month periods ended June 30, 2019 2020 (unaudited) Balance at the beginning of the period 155,852 205,976 Increase during the period 37,142 40,774 Balance at the end of the period 192,994 246,750 |
LOSS PER ORDINARY SHARE (Tables
LOSS PER ORDINARY SHARE (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of computation of basic and diluted loss per share | Six-month periods ended June 30, 2019 2020 (unaudited) Net loss (229,779) (193,078) Change in redemption value of redeemable preferred shares (17,760) — Cumulative dividend on redeemable preferred shares (13,472) (26,667) Net loss attributable to ordinary shareholders (261,011) (219,745) Weighted average number of ordinary shares outstanding - basic and diluted 1,070,590,091 1,186,168,652 Loss per ordinary share - basic and diluted (0.24) (0.19) |
Schedule of securities excluded from the computation of diluted loss per share | Six-month periods ended June 30, 2019 2020 (unaudited) Share options/restricted shares 43,134,256 29,858,248 Convertible bonds payable 46,527,600 46,527,600 Total 89,661,856 76,385,848 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of capital commitments outstanding not provided for in the financial statements | As of December 31, June 30, 2019 2020 Contracted for 2,722,084 3,343,911 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of material related party relationship | Name of party Relationship STT GDC Principal ordinary shareholder of the Company STT Singapore DC Pte. Ltd. Subsidiary of STT GDC STT DEFU 2 Pte. Ltd. Subsidiary of STT GDC |
Schedule of major transactions with related parties | Six-month periods ended June 30, 2019 2020 (unaudited) Commission income STT Singapore DC Pte. Ltd. (i) — 246 STT DEFU 2 Pte. Ltd. (i) — 244 — 490 |
Schedule of major balances with related parties | As of December 31, June 30, 2019 2020 Amount due to related parties: (i) STT DEFU 2 Pte. Ltd. 6,638 11,193 STT Singapore DC Pte. Ltd. 5,350 10,195 11,988 21,388 Note (i): During the year ended December 31, 2019, the Company successfully referred a customer to STT Singapore DC Pte. Ltd. and STT DEFU 2 Pte. Ltd. As of December 31, 2019, amount due to related parties represents the service fee received on behalf of the related parties for one of their customers, which is recorded in accrued expenses and other payables. |
PARENT ONLY FINANCIAL INFORMA_2
PARENT ONLY FINANCIAL INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of condensed financial statements | Condensed Balance Sheets As of December 31, 2019 June 30, 2020 Assets Current assets Cash 2,560,388 4,280,909 Prepaid expenses 7,048 3,987 Other current assets 21,537 16,688 Total current assets 2,588,973 4,301,584 Restricted cash 27,225 27,636 Investment and loans to subsidiaries 11,539,590 13,436,889 Other non-current assets 4,954 4,542 Total assets 14,160,742 17,770,651 Liabilities, Redeemable Preferred Shares and Shareholders’ Equity Current liabilities Accounts payable 7,168 695 Accrued expenses and other payables 49,546 93,290 Due to subsidiaries 928 942 Total current liabilities 57,642 94,927 Long-term borrowings 681,235 686,730 Convertible bonds payable 2,049,654 2,086,179 Other long-term liabilities 16,649 10,016 Total liabilities 2,805,180 2,877,852 Redeemable preferred shares (US$0.00005 par value; 150,000 shares authorized, issued and outstanding as of December 31, 2019 and June 30, 2020; Redemption value of RMB1,061,981 and RMB1,064,137 as of December 31, 2019 and June 30, 2020, respectively; Liquidation value of RMB1,537,636 and RMB2,378,419 as of December 31, 2019 and June 30, 2020, respectively) 1,061,981 1,064,137 Shareholders' equity Ordinary shares (US$0.00005 par value; 2,002,000,000 shares authorized; 1,148,842,379 and 1,210,996,227 Class A ordinary shares issued outstanding 412 434 Additional paid-in capital 12,403,043 16,125,571 Accumulated other comprehensive loss (52,684) (47,075) Accumulated deficit (2,057,190) (2,250,268) Total shareholders’ equity 10,293,581 13,828,662 Commitments and contingencies Total liabilities, redeemable preferred shares and shareholders’ equity 14,160,742 17,770,651 Condensed Statements of Operations Six-month periods ended June 30, 2019 2020 (unaudited) Net revenue — — Cost of revenue (17,414) (36,659) Gross loss (17,414) (36,659) Operating expenses Selling and marketing expenses (15,301) (25,662) General and administrative expenses (66,492) (94,191) Research and development expenses (870) (1,752) Loss from operations (100,077) (158,264) Other income (expenses): Interest income 23,490 2,837 Interest expenses (68,340) (65,283) Equity in (loss) income of subsidiaries (84,852) 28,796 Others, net — (1,164) Loss before income taxes (229,779) (193,078) Income tax expenses — — Net loss (229,779) (193,078) Condensed Statements of Comprehensive Loss Six-month periods ended June 30, 2019 2020 (unaudited) Net loss (229,779) (193,078) Other comprehensive income: Foreign currency translation adjustments, net of nil tax 66,872 5,609 Comprehensive loss (162,907) (187,469) Condensed Statements of Cash Flows Six-month periods ended June 30, 2019 2020 (unaudited) Operating activities: Net cash used in operating activities (39,268) (60,886) Investing activities Increase of due from subsidiaries (1,506,159) (1,843,512) Net cash used in investing activities (1,506,159) (1,843,512) Financing activities: Proceeds from long-term borrowings 268,100 — Payment of issuance cost of borrowings — (10,619) Proceeds from exercise of stock options 43,508 77,415 Net proceeds from issuance of ordinary shares 2,982,242 3,560,004 Net proceeds from issuance of redeemable preferred shares 989,349 — Payment of redeemable preferred shares dividends (11,458) (40,068) Net cash provided by financing activities 4,271,741 3,586,732 Effect of exchange rate changes on cash and restricted cash 84,356 38,598 Net increase in cash and restricted cash 2,810,670 1,720,932 Cash and restricted cash at beginning of period 817,488 2,587,613 Cash and restricted cash at end of period 3,628,158 4,308,545 Supplemental disclosures of cash flow information Interest paid 41,006 45,692 Supplemental disclosures of non-cash investing and financing activities Settlement of liability-classified restricted share award 3,627 4,675 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) ¥ in Thousands | 1 Months Ended | 6 Months Ended | |
Dec. 31, 2019director | Jun. 30, 2020CNY (¥) | Jun. 30, 2019CNY (¥) | |
Shareholders of Management HoldCo | |||
VIEs financial information | |||
Loans | ¥ 1,000 | ||
GDS Beijing and GDS Shanghai | |||
VIEs financial information | |||
Ownership transferred (as a percent) | 100.00% | ||
Number of directors replacing prior sold director | director | 3 | ||
VIEs | |||
VIEs financial information | |||
Costs recognized by the VIEs for outsourcing and other services provided by other entities within the Company | 1,319,663 | ¥ 921,386 | |
VIEs | Management HoldCo | |||
VIEs financial information | |||
Loans | ¥ 310,100 | ||
Right of GDS Investment Company to require repayment of the loans, prior notice period | 30 days |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Financial statement balances and amounts of the VIEs and their subsidiaries (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Current assets | |||
Cash | ¥ 7,742,082 | ¥ 5,810,938 | |
Accounts receivable, net of allowance for doubtful accounts | 1,388,535 | 879,962 | |
VAT recoverable | 114,575 | 129,994 | |
Prepaid expenses | 104,357 | 80,913 | |
Other current assets | 155,782 | 148,603 | |
Total current assets | 9,618,087 | 7,084,709 | |
Property and equipment, net | 24,542,951 | 19,184,639 | |
Intangible assets, net | 557,971 | 394,628 | |
Operating lease right-of-use assets | 1,909,239 | 796,679 | |
Deferred tax assets | 136,809 | 72,931 | |
Restricted cash | 171,705 | 128,025 | |
VAT recoverable | 1,129,440 | 888,483 | |
Other non-current assets | 385,643 | 289,410 | |
Total assets | 41,608,850 | 31,492,531 | |
Current liabilities | |||
Short-term borrowings and current portion of long-term borrowings | 1,681,787 | 1,137,737 | |
Accounts payable | 2,880,745 | 1,675,966 | |
Accrued expenses and other payables | 1,541,688 | 817,883 | |
Deferred revenue | 59,826 | 90,316 | |
Operating lease liabilities, current | 73,362 | 55,139 | |
Finance lease and other financing obligations, current | 230,746 | 222,473 | |
Total current liabilities | 6,468,154 | 3,999,514 | |
Long-term borrowings, excluding current portion | 9,337,882 | 8,028,473 | |
Operating lease liabilities, non-current | 1,141,835 | 709,998 | |
Finance lease and other financing obligations, non-current | 7,101,401 | 4,751,121 | |
Deferred tax liabilities | 282,266 | 252,672 | |
Other long-term liabilities | 298,334 | 345,537 | |
Amounts due to GDS Holdings and its non-VIE subsidiaries, net | 21,388 | 11,988 | |
Total liabilities | 26,716,051 | 20,136,969 | |
Net revenue, net income (loss), operating, investing and financing cash flows | |||
Net revenue | 2,582,623 | ¥ 1,877,030 | |
Net profit | (193,078) | (229,779) | |
Net cash provided by operating activities | 16,238 | 56,104 | |
Net cash used in investing activities | (3,884,836) | (1,373,593) | |
Net cash used in financing activities | 5,872,392 | 4,769,377 | |
Accounts receivable | |||
Current liabilities | |||
Assets pledged | 949,474 | 520,382 | |
Property and equipment | |||
Current liabilities | |||
Assets pledged | 3,987,569 | 2,493,872 | |
VIEs | |||
Current assets | |||
Cash | 888,353 | 730,960 | |
Accounts receivable, net of allowance for doubtful accounts | 1,278,630 | 858,764 | |
VAT recoverable | 45,870 | 46,817 | |
Prepaid expenses | 55,175 | 39,124 | |
Other current assets | 45,152 | 32,929 | |
Total current assets | 2,313,180 | 1,708,594 | |
Property and equipment, net | 2,834,443 | 2,911,727 | |
Intangible assets, net | 149,278 | 159,860 | |
Operating lease right-of-use assets | 169,556 | 91,329 | |
Deferred tax assets | 39,486 | 34,157 | |
Restricted cash | 49,987 | 29,508 | |
VAT recoverable | 123,264 | 136,011 | |
Other non-current assets | 98,761 | 75,873 | |
Total assets | 5,777,955 | 5,147,059 | |
Current liabilities | |||
Amounts due to GDS Holdings and its non-VIE subsidiaries, net | 1,957,479 | 1,534,768 | |
Total liabilities | 5,568,645 | 5,025,104 | |
Net revenue, net income (loss), operating, investing and financing cash flows | |||
Net revenue | 2,489,175 | 1,837,452 | |
Net profit | 87,354 | 7,036 | |
Net cash provided by operating activities | 261,379 | 24,371 | |
Net cash used in investing activities | (68,734) | (91,297) | |
Net cash used in financing activities | (14,773) | ¥ (4,790) | |
VIEs | Accounts receivable | |||
Current liabilities | |||
Assets pledged | 85,870 | 83,468 | |
VIEs | Property and equipment | |||
Current liabilities | |||
Assets pledged | 150,800 | 114,344 | |
VIEs | Third party | |||
Current liabilities | |||
Short-term borrowings and current portion of long-term borrowings | 536,023 | 493,614 | |
Accounts payable | 243,637 | 181,448 | |
Accrued expenses and other payables | 199,029 | 160,401 | |
Deferred revenue | 52,290 | 68,003 | |
Operating lease liabilities, current | 41,576 | 31,869 | |
Finance lease and other financing obligations, current | 27,339 | 125,318 | |
Total current liabilities | 1,099,894 | 1,060,653 | |
Long-term borrowings, excluding current portion | 1,289,454 | 1,335,084 | |
Operating lease liabilities, non-current | 133,719 | 66,387 | |
Finance lease and other financing obligations, non-current | 986,301 | 921,965 | |
Deferred tax liabilities | 81,302 | 76,297 | |
Other long-term liabilities | 20,496 | 29,950 | |
Total liabilities | ¥ 3,611,166 | ¥ 3,490,336 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and equipment (Details) | 6 Months Ended |
Jun. 30, 2020 | |
Buildings | Maximum | |
Property and equipment | |
Estimated useful life (in years) | 30 years |
Machinery | Minimum | |
Property and equipment | |
Estimated useful life (in years) | 10 years |
Machinery | Maximum | |
Property and equipment | |
Estimated useful life (in years) | 20 years |
Other equipment | Minimum | |
Property and equipment | |
Estimated useful life (in years) | 3 years |
Other equipment | Maximum | |
Property and equipment | |
Estimated useful life (in years) | 5 years |
Furniture and office equipment | Minimum | |
Property and equipment | |
Estimated useful life (in years) | 3 years |
Furniture and office equipment | Maximum | |
Property and equipment | |
Estimated useful life (in years) | 5 years |
Vehicles | |
Property and equipment | |
Estimated useful life (in years) | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Asset retirement costs (Details) ¥ in Thousands | 6 Months Ended |
Jun. 30, 2020CNY (¥) | |
Activity of the asset retirement obligation liability | |
Asset retirement obligations at beginning of the period | ¥ 52,441 |
Additions | 8,438 |
Accretion expense | 1,840 |
Asset retirement obligations at end of the period | ¥ 62,719 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible assets (Details) | 6 Months Ended |
Jun. 30, 2020 | |
Customer relationships | Minimum | |
Intangible assets | |
Weighted-average amortization period (in years) | 5 years |
Customer relationships | Maximum | |
Intangible assets | |
Weighted-average amortization period (in years) | 15 years |
Licenses | |
Intangible assets | |
Weighted-average amortization period (in years) | 20 years |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Prepaid land use rights (Details) - Prepaid land use rights | 6 Months Ended |
Jun. 30, 2020 | |
Minimum | |
Prepaid land use rights | |
Amortization based on remaining terms (in years) | 27 years |
Maximum | |
Prepaid land use rights | |
Amortization based on remaining terms (in years) | 42 years |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) ¥ in Thousands | 6 Months Ended |
Jun. 30, 2020CNY (¥) | |
Goodwill | |
Impairment losses for goodwill | ¥ 0 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Impairment of long-lived assets (Details) ¥ in Thousands | 6 Months Ended |
Jun. 30, 2020CNY (¥) | |
Impairment of long-lived assets | |
Impairment losses for long-lived assets | ¥ 0 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Value-added-tax ("VAT") (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Value-added-tax ("VAT") | ||
VAT recoverable | ¥ 114,575 | ¥ 129,994 |
VAT recoverable | 1,129,440 | 888,483 |
Current assets | ||
Value-added-tax ("VAT") | ||
VAT recoverable | 114,575 | 129,994 |
Noncurrent assets | ||
Value-added-tax ("VAT") | ||
VAT recoverable | 1,129,440 | 888,483 |
Accrued expenses and other payables | ||
Value-added-tax ("VAT") | ||
VAT payables | ¥ 16,663 | ¥ 7,886 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition (Details) | 6 Months Ended |
Jun. 30, 2020 | |
Maximum | Consulting services | |
Revenue recognition | |
Contract service period | 1 year |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Research and development and advertising costs, Government grants, Capitalized interest and Debt issuance cost (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Research and development and advertising costs | |||
Research and development expenses | ¥ 18,987 | ¥ 8,839 | |
Advertising costs | 1,669 | 2,308 | |
Government grants | |||
Deferred government grants in other long-term liabilities | 6,196 | ¥ 6,507 | |
Deferred government grants in accrued expenses and other payables | 172 | 6,003 | |
Capitalized interest | |||
Total interest costs | 598,296 | 510,568 | |
Less: interest costs capitalized | (29,001) | (43,877) | |
Interest expenses | 569,295 | ¥ 466,691 | |
Debt issuance costs | |||
Unamortised debt issuance costs | ¥ 277,563 | ¥ 273,822 |
SUMMARY OF SIGNIFICANT ACCOU_15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Employee benefits (Details) | 6 Months Ended |
Jun. 30, 2020 | |
Minimum | |
Employee benefits | |
Employer contribution (as a percent) | 28.00% |
Maximum | |
Employee benefits | |
Employer contribution (as a percent) | 49.00% |
SUMMARY OF SIGNIFICANT ACCOU_16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign currency translation and foreign currency risks (Details) € in Thousands, ¥ in Thousands, ¥ in Thousands, $ in Thousands, $ in Thousands, $ in Thousands | Jun. 30, 2020CNY (¥) | Jun. 30, 2020USD ($) | Jun. 30, 2020HKD ($) | Jun. 30, 2020JPY (¥) | Jun. 30, 2020EUR (€) | Jun. 30, 2020SGD ($) | Dec. 31, 2019CNY (¥) |
RMB | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | ¥ | ¥ 2,693,980 | ¥ 2,119,758 | |||||
USD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 5,128,567 | $ 724,425 | |||||
HKD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 192,641 | $ 210,906 | |||||
JPY | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 2,034 | ¥ 30,909 | |||||
EUR | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 1,166 | € 146 | |||||
SGD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 8,155 | $ 1,605 | |||||
PRC | RMB | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | ¥ | 2,657,679 | ||||||
PRC | USD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 71,653 | ||||||
Hong Kong SAR | RMB | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | ¥ | ¥ 36,301 | ||||||
Hong Kong SAR | USD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 17,641 | ||||||
Hong Kong SAR | HKD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | $ 210,906 | ||||||
Hong Kong SAR | JPY | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | ¥ | ¥ 30,909 | ||||||
Hong Kong SAR | EUR | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | € | € 146 | ||||||
US | USD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | 630,873 | ||||||
Singapore | USD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | $ 4,258 | ||||||
Singapore | SGD | |||||||
Foreign currency translation and foreign currency risks | |||||||
Cash and restricted cash | $ 1,605 |
CASH AND RESTRICTED CASH (Detai
CASH AND RESTRICTED CASH (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Cash | ¥ 7,742,082 | ¥ 5,810,938 | ||
Restricted cash - current assets | 112,756 | 34,299 | ||
Restricted cash - non-current assets | 171,705 | 128,025 | ||
Total cash and restricted cash shown in the consolidated statements of cash flows | ¥ 8,026,543 | ¥ 5,973,262 | ¥ 5,849,956 | ¥ 2,284,748 |
CONTRACT BALANCES (Details)
CONTRACT BALANCES (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accounts receivable, net | ||||
Accounts receivable | ¥ 1,388,987 | ¥ 881,177 | ||
Less: allowance for doubtful accounts | (452) | ¥ (322) | (133) | ¥ (241) |
Accounts receivable, net | 1,388,535 | 881,044 | ||
- Current portion | 1,388,535 | 879,962 | ||
- Non-current portion | 0 | 1,082 | ||
Movement of the allowance for doubtful accounts | ||||
Allowance made during the period | 319 | 81 | ||
Deferred Revenue | ||||
Beginning balance as of January 1, 2020 | 105,735 | |||
Decrease | (31,044) | |||
Closing balance as of June 30, 2020 | 74,691 | |||
Deferred revenue expected to be recognized as revenue after one year | 14,865 | 15,419 | ||
Revenue recognized from the opening deferred revenue balance | 77,366 | ¥ 61,696 | ||
Accounts receivable | ||||
Accounts receivable, net | ||||
Assets pledged | 949,474 | ¥ 520,382 | ||
Accounts receivable | Finance lease and other financing obligations | ||||
Accounts receivable, net | ||||
Assets pledged | ¥ 115,349 |
CONTRACT BALANCES - Remaining p
CONTRACT BALANCES - Remaining performance obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 ¥ in Thousands | Jun. 30, 2020CNY (¥) |
Remaining performance obligations | |
Remaining performance obligations | ¥ 1,296,829 |
Period over which revenue and deferred revenue are expected to be recognized as revenue | 3 years |
PROPERTY AND EQUIPMENT, NET (De
PROPERTY AND EQUIPMENT, NET (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
At cost: | ||
Property and equipment, gross | ¥ 24,433,391 | ¥ 18,564,786 |
Less: Accumulated depreciation | (3,267,380) | (2,580,320) |
Property and equipment net excluding construction in process | 21,166,011 | 15,984,466 |
Construction in progress | 3,376,940 | 3,200,173 |
Property and equipment, net | 24,542,951 | 19,184,639 |
Land | ||
At cost: | ||
Property and equipment, gross | 877,640 | 855,310 |
Buildings | ||
At cost: | ||
Property and equipment, gross | 8,198,521 | 5,964,048 |
Data center equipment | ||
At cost: | ||
Property and equipment, gross | 8,322,958 | 5,567,606 |
Leasehold improvement | ||
At cost: | ||
Property and equipment, gross | 6,955,273 | 6,111,733 |
Furniture and office equipment | ||
At cost: | ||
Property and equipment, gross | 74,858 | 61,974 |
Vehicles | ||
At cost: | ||
Property and equipment, gross | ¥ 4,141 | ¥ 4,115 |
PROPERTY AND EQUIPMENT, NET - A
PROPERTY AND EQUIPMENT, NET - Acquired under finance leases and other financing arrangement (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
At cost: | ||
Finance leases, net | ¥ 7,764,891 | ¥ 6,070,349 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, Plant and Equipment, Net |
PROPERTY AND EQUIPMENT, NET - D
PROPERTY AND EQUIPMENT, NET - Depreciation (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Depreciation expense | ||
Depreciation of property and equipment | ¥ 668,067 | ¥ 481,288 |
Cost of revenue | ||
Depreciation expense | ||
Depreciation of property and equipment | 631,329 | 476,361 |
General and administrative expenses | ||
Depreciation expense | ||
Depreciation of property and equipment | 35,207 | 4,405 |
Research and development expenses | ||
Depreciation expense | ||
Depreciation of property and equipment | ¥ 1,531 | ¥ 522 |
PROPERTY AND EQUIPMENT, NET -_2
PROPERTY AND EQUIPMENT, NET - Additional information (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
PROPERTY AND EQUIPMENT, NET | ||
Payables for purchase of property and equipment due beyond one year | ¥ 185,310 | ¥ 231,458 |
Property and equipment | ||
PROPERTY AND EQUIPMENT, NET | ||
Net book value of an asset pledged as security for bank loans and other financing obligations | ¥ 3,987,569 | ¥ 2,493,872 |
INTANGIBLE ASSETS, NET (Details
INTANGIBLE ASSETS, NET (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Intangible assets | |||
Intangible assets, gross | ¥ 699,500 | ¥ 553,322 | |
Less: accumulated amortization | (141,529) | (158,694) | |
Intangible assets, net | 557,971 | 394,628 | |
Amortization of intangible assets | 27,657 | ¥ 28,963 | |
Estimated future amortization expense, Twelve-month periods ending June 30 | |||
2021 | 76,864 | ||
2022 | 76,924 | ||
2023 | 76,782 | ||
2024 | 71,516 | ||
2025 | 65,814 | ||
Thereafter | 190,071 | ||
Customer relationships | |||
Intangible assets | |||
Intangible assets, gross | 693,500 | 547,322 | |
Licenses | |||
Intangible assets | |||
Intangible assets, gross | ¥ 6,000 | ¥ 6,000 |
PREPAID LAND USE RIGHTS (Detail
PREPAID LAND USE RIGHTS (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Prepaid land use rights | ¥ 797,134 | ¥ 782,319 | |
Less: Accumulated amortization | (49,454) | (35,132) | |
Prepaid land use rights, net | 747,680 | 747,187 | |
Amortization of prepaid land use rights | 13,499 | ¥ 12,962 | |
Prepaid land use rights | |||
Net book value of an asset pledged as security for bank loans and other financing obligations | ¥ 734,566 | ¥ 741,032 |
BUSINESS COMBINATIONS - Movemen
BUSINESS COMBINATIONS - Movement of goodwill (Details) ¥ in Thousands | 6 Months Ended |
Jun. 30, 2020CNY (¥) | |
Movement of goodwill | |
Balance at the beginning of the period | ¥ 1,905,840 |
Addition during the period | 503,485 |
Balance at end of period | ¥ 2,409,325 |
BUSINESS COMBINATIONS - Equity
BUSINESS COMBINATIONS - Equity Interest acquired (Details) ¥ in Thousands | Jun. 05, 2020CNY (¥)item | May 02, 2018CNY (¥) | May 31, 2020CNY (¥) | Jun. 30, 2020CNY (¥) | Dec. 31, 2019CNY (¥) |
Recognized amounts of identifiable assets acquired and liabilities assumed: | |||||
Goodwill | ¥ 2,409,325 | ¥ 1,905,840 | |||
Gain from purchase price adjustment | (55,154) | ||||
Beijing 10, 11 and 12 | |||||
The identifiable assets acquired and liabilities assumed in the business combination | |||||
Fair value of consideration | ¥ 847,586 | ||||
Contingent consideration | ¥ 130,720 | ||||
Number of data center projects | item | 3 | ||||
Recognized amounts of identifiable assets acquired and liabilities assumed: | |||||
Cash | ¥ (2,349) | ||||
Accounts receivable | (81,027) | ||||
Property and equipment | (1,971,432) | ||||
Operating lease ROU assets | (94,821) | ||||
Identifiable intangible assets | (191,000) | ||||
Other assets | (149,956) | ||||
Accounts payable | 727,043 | ||||
Finance lease and other financing obligations, current | 171,979 | ||||
Operating lease liabilities, current | 6,092 | ||||
Finance lease and other financing obligations, non-current | 1,062,114 | ||||
Operating lease liabilities, non- current | 92,360 | ||||
Deferred tax liabilities | 13,833 | ||||
Other liabilities | 38,586 | ||||
Total identifiable net assets | (378,578) | ||||
Goodwill | ¥ 503,485 | ||||
Beijing 10, 11 and 12 | Other payables | |||||
The identifiable assets acquired and liabilities assumed in the business combination | |||||
Contingent consideration | 527,586 | ||||
Guangzhou 3 | |||||
The identifiable assets acquired and liabilities assumed in the business combination | |||||
Fair value of consideration | ¥ 262,244 | ¥ 207,310 | |||
Contingent consideration | ¥ 245,244 | 51,067 | 118,336 | ||
Recognized amounts of identifiable assets acquired and liabilities assumed: | |||||
Gain from purchase price adjustment | 55,154 | ||||
Guangzhou 3 | Other payables | |||||
The identifiable assets acquired and liabilities assumed in the business combination | |||||
Contingent consideration | 31,412 | 95,274 | |||
Guangzhou 3 | Other long-term liabilities | |||||
The identifiable assets acquired and liabilities assumed in the business combination | |||||
Contingent consideration | ¥ 19,655 | ¥ 23,062 |
BUSINESS COMBINATIONS - Assets
BUSINESS COMBINATIONS - Assets acquired notes (Details) - CNY (¥) ¥ in Thousands | Jun. 05, 2020 | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 |
Business Combination, Goodwill | ||||
Net profit | ¥ (193,078) | ¥ (229,779) | ||
Beijing 10, 11 and 12 | ||||
Business Combination, Goodwill | ||||
Effective settlement of pre-existing relationships upon consolidation | ¥ 34,477 | |||
Property and equipment | 1,971,432 | |||
Intangible assets | 191,000 | |||
Revenues | ¥ 28,850 | |||
Net profit | ¥ 582 | |||
Beijing 10, 11 and 12 | Property and equipment under finance lease | ||||
Business Combination, Goodwill | ||||
Property and equipment | 632,427 | |||
Customer relationships | Beijing 10, 11 and 12 | ||||
Business Combination, Goodwill | ||||
Intangible assets | ¥ 191,000 | |||
Estimated useful life (in years) | 7 years 7 months 6 days |
BUSINESS COMBINATIONS - Asset a
BUSINESS COMBINATIONS - Asset acquisitions (Details) - Asset acquisitions in six-month period ended June 30, 2020 - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Asset Acquisitions [Abstract] | ||
Total cash considerations (net of the cash acquired) | ¥ 36,952 | |
Remaining consideration payable for asset acquisitions recorded in other payables | ¥ 45,440 | ¥ 13,070 |
LOANS AND BORROWINGS - Total lo
LOANS AND BORROWINGS - Total loans and borrowings (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Loans and borrowings | ||
Short-term borrowings | ¥ 734,208 | ¥ 397,213 |
Current portion of long-term borrowings | 947,579 | 740,524 |
Sub-total | 1,681,787 | 1,137,737 |
Long-term borrowings, excluding current portion | 9,337,882 | 8,028,473 |
Total loans and borrowings | ¥ 11,019,669 | ¥ 9,166,210 |
LOANS AND BORROWINGS - Type of
LOANS AND BORROWINGS - Type of short-term borrowings (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Short-term borrowings by type | ||
Unsecured short-term borrowings | ¥ 70,000 | ¥ 80,000 |
Secured short-term borrowings | 664,208 | 317,213 |
Short-term borrowings | ¥ 734,208 | ¥ 397,213 |
LOANS AND BORROWINGS - Short-te
LOANS AND BORROWINGS - Short-term borrowings secured (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Short-term borrowings | ||
Weighted average interest rates of short-term borrowings | 5.40% | 5.64% |
Accounts receivable | ||
Short-term borrowings | ||
Assets to secure short-term borrowings | ¥ 37,782 | ¥ 11,535 |
LOANS AND BORROWINGS - Long-ter
LOANS AND BORROWINGS - Long-term borrowings (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Long-term borrowings by type | ||
Unsecured long-term borrowings | ¥ 127,500 | ¥ 42,500 |
Secured long-term borrowings | 10,157,961 | 8,726,497 |
Long-term borrowings | ¥ 10,285,461 | ¥ 8,768,997 |
LOANS AND BORROWINGS - Long-t_2
LOANS AND BORROWINGS - Long-term borrowings secured (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Loans and Borrowings | ||
Assets to secure long-term loans and borrowings | ¥ 5,048,253 | ¥ 3,743,751 |
Weighted average interest rates of long-term borrowings | 7.02% | 7.40% |
Accounts receivable | ||
Loans and Borrowings | ||
Assets to secure long-term loans and borrowings | ¥ 911,692 | ¥ 508,847 |
Property and equipment | ||
Loans and Borrowings | ||
Assets to secure long-term loans and borrowings | 3,401,995 | 2,493,872 |
Prepaid land use rights | ||
Loans and Borrowings | ||
Assets to secure long-term loans and borrowings | ¥ 734,566 | ¥ 741,032 |
LOANS AND BORROWINGS - Aggregat
LOANS AND BORROWINGS - Aggregate rolling maturities (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Maturities of long-term borrowings, Twelve-months ending June 30, | ||
2021 | ¥ 947,579 | |
2022 | 1,995,581 | |
2023 | 2,094,516 | |
2024 | 2,258,340 | |
2025 | 968,067 | |
Thereafter | 2,021,378 | |
Long-term borrowings | ¥ 10,285,461 | ¥ 8,768,997 |
LOANS AND BORROWINGS - Total wo
LOANS AND BORROWINGS - Total working capital and project financing credit (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Loans and Borrowings | ||
Outstanding loans (net of debt issuance costs) | ¥ 734,208 | ¥ 397,213 |
Outstanding loans (net of debt issuance costs) | 10,285,461 | 8,768,997 |
Debt issuance costs | 277,563 | ¥ 273,822 |
Credit facilities | ||
Loans and Borrowings | ||
Total working capital and project financing credit facilities | 17,814,872 | |
Unused amount | 6,555,311 | |
Loan drew down | 11,259,561 | |
Credit facilities | Short-term borrowing | ||
Loans and Borrowings | ||
Outstanding loans (net of debt issuance costs) | 734,208 | |
Debt issuance costs | 690 | |
Credit facilities | Long-term borrowing | ||
Loans and Borrowings | ||
Outstanding loans (net of debt issuance costs) | 10,285,461 | |
Debt issuance costs | ¥ 239,202 | |
Minimum | ||
Loans and Borrowings | ||
Terms of secured loan agreements with various financial institutions for project development and working capital purpose | 1 year | |
Maximum | ||
Loans and Borrowings | ||
Terms of secured loan agreements with various financial institutions for project development and working capital purpose | 13 years |
LOANS AND BORROWINGS - Particul
LOANS AND BORROWINGS - Particulars of secured long-term loans and borrowings (Details) ¥ in Thousands, $ in Thousands | Jun. 30, 2020USD ($) | Jun. 30, 2020CNY (¥) |
Secured long-term loans and borrowings | ||
Early repayment if STT Communications Ltd. ceases to directly or indirectly own, the percentage of equity interests of STT GDC Pte. Ltd. | 50.10% | 50.10% |
Early repayment if STT GDC PTe. Ltd. ceases to own and control, the percentage of issued share capital | 25.00% | 25.00% |
Early repayment if STT GDC PTe. Ltd. power to cast, or control the casting of voting in meeting, the percentage of equity interest in the Company | 25.00% | 25.00% |
Financial covenants, fails to repay any financial indebtedness in an aggregate amount | $ 4,500 | ¥ 50,000 |
The Company and GDS Investment | ||
Secured long-term loans and borrowings | ||
Early repayment requirement, cease control of certain affiliate, percentage | 100.00% | 100.00% |
Management HoldCo | ||
Secured long-term loans and borrowings | ||
Early repayment requirement, cease control of certain affiliate, percentage | 100.00% | 100.00% |
GDS Beijing, GDS Suzhou, and Relevant Borrowing Subsidiaries | ||
Secured long-term loans and borrowings | ||
Early repayment if cease to own and control percentage of the equity interest in the borrowing subsidiaries | 100.00% | 100.00% |
CONVERTIBLE BONDS PAYABLE (Deta
CONVERTIBLE BONDS PAYABLE (Details) $ / shares in Units, ¥ in Thousands, $ in Thousands | Jun. 05, 2018USD ($)$ / shares | Jun. 30, 2020CNY (¥) | Dec. 31, 2019CNY (¥) |
CONVERTIBLE BONDS PAYABLE | |||
Debt issuance costs | ¥ | ¥ 277,563 | ¥ 273,822 | |
Accrued interests | ¥ | 48,795 | 43,776 | |
Accrued expenses | |||
CONVERTIBLE BONDS PAYABLE | |||
Accrued interests | ¥ | ¥ 3,540 | ¥ 3,488 | |
Convertible Bonds due 2025 | |||
CONVERTIBLE BONDS PAYABLE | |||
Principal amount | $ | $ 300,000 | ||
Debt issuance costs | $ | $ 8,948 | ||
Interest per annum (as a percent) | 2.00% | ||
Maximum principal amount convertible to ordinary shares (as a percent) | 100.00% | ||
Denominations for repurchase of Notes | $ | $ 1 | ||
Effective interest rate | 2.65% | 2.65% | |
Convertible Bonds due 2025 | ADS | |||
CONVERTIBLE BONDS PAYABLE | |||
Basis of issuance of shares for debt conversion (in dollar per share) | $ / shares | $ 51.58 | ||
Conversion rate per US$1,000 principal amount | 19.3865 |
ACCRUED EXPENSES AND OTHER PA_3
ACCRUED EXPENSES AND OTHER PAYABLES (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Accrued interest expenses | ¥ 48,795 | ¥ 43,776 |
Accrued debt issuance costs and other financing costs | 53,933 | 28,082 |
Income tax payable | 128,100 | 93,307 |
Other tax payable | 54,519 | 28,259 |
Consideration payables for acquisitions | 845,853 | 362,032 |
Deferred government grants | 172 | 6,003 |
Accrued payroll and welfare benefits | 75,178 | 97,486 |
Accrued professional fees | 42,734 | 41,630 |
Accrued data center outsourcing service fees | 6,857 | 17,989 |
Amount due to related parties | 21,388 | 11,988 |
Amount due to a financial institution | 112,380 | 34,190 |
Interest rate swap contracts (Note 15) | 17,182 | 351 |
Other accrued operating expenses | 59,484 | 38,020 |
Other payables | 75,113 | 14,770 |
Total accrued expenses and other payables | ¥ 1,541,688 | ¥ 817,883 |
LEASE - Data center buildings a
LEASE - Data center buildings and land leases (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
LEASE | ||
Finance lease liabilities | ¥ 5,958,108 | ¥ 4,663,508 |
Operating lease liabilities | 1,215,197 | ¥ 765,137 |
Data center buildings and land leases | ||
LEASE | ||
Finance lease liabilities | 988,890 | |
Operating lease liabilities | ¥ 390,515 |
LEASE - Build-to-suit lease (De
LEASE - Build-to-suit lease (Details) ¥ in Thousands | 2 Months Ended | ||
Aug. 31, 2018CNY (¥)lease | Jun. 30, 2020CNY (¥) | Dec. 31, 2019CNY (¥) | |
Build-to-suit leases | |||
Finance lease liabilities | ¥ 5,958,108 | ¥ 4,663,508 | |
Operating lease liabilities | 1,215,197 | ¥ 765,137 | |
Shanghai 12 Lease and Shanghai 13 Lease, Build-to-suit | |||
Build-to-suit leases | |||
Rent paid | ¥ 0 | ||
Number of leases agreements under third-party developer-lessor | lease | 2 | ||
Finance lease liabilities | 287,233 | ||
Operating lease liabilities | ¥ 62,205 | ||
Shanghai 12 Lease, Build-to-suit | |||
Build-to-suit leases | |||
Lease terms | 15 years 8 months 12 days | ||
Shanghai 13 Lease, Build-to-suit | |||
Build-to-suit leases | |||
Lease terms | 20 years |
LEASE - Components of Lease Exp
LEASE - Components of Lease Expense (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Components of lease cost | ||
Finance lease cost:- Amortization of right-of-use assets | ¥ 169,352 | ¥ 103,566 |
Finance lease cost:- Interest on lease liabilities | 192,489 | 144,928 |
Operating lease cost | 85,028 | 50,702 |
Short-term lease cost | 3,223 | 1,772 |
Variable lease cost | (40,189) | |
Total lease expense | 409,903 | ¥ 300,968 |
Lease concessions granted | 40,142 | |
Variable lease cost (credit) recognized for certain finance leases with floating interest rate | ¥ 47 |
LEASE - Supplemental Cash Flow
LEASE - Supplemental Cash Flow Information Related to Leases (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
LEASE | ||
Cash paid for amounts included in measurement of lease liabilities:- Operating cash flows from finance leases | ¥ (159,802) | ¥ (119,396) |
Cash paid for amounts included in measurement of lease liabilities:- Operating cash flows from operating leases | (62,123) | (45,312) |
Cash paid for amounts included in measurement of lease liabilities:- Financing cash flows from finance leases | (78,888) | (203,911) |
Non-cash information on lease liabilities arising from obtaining ROU assets- Finance leases | 660,325 | 699,524 |
Non-cash information on lease liabilities arising from obtaining ROU assets- Operating leases | 406,853 | ¥ 3,770 |
Cash paid for purchase of land use rights and initial direct costs | ¥ 570,821 |
LEASE - Weighted Average Remain
LEASE - Weighted Average Remaining Lease Term and Weighted Average Discount Rate for Leases (Details) | Jun. 30, 2020 | Dec. 31, 2019 |
LEASE | ||
Weighted average remaining lease term (years):- Finance leases | 14 years 1 month 6 days | 15 years 2 months 12 days |
Weighted average remaining lease term (years):- Operating leases | 15 years 10 months 24 days | 15 years 7 months 6 days |
Weighted average discount rate:- Finance leases | 7.06% | 6.91% |
Weighted average discount rate:- Operating leases | 6.25% | 6.35% |
LEASE - Maturities of Lease Lia
LEASE - Maturities of Lease Liabilities (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Finance lease obligations | ||
Within 1 year | ¥ 545,457 | ¥ 502,261 |
After 1 year but within 2 years | 521,945 | 399,200 |
After 2 years but within 3 years | 553,473 | 399,843 |
After 3 years but within 4 years | 569,126 | 414,126 |
After 4 years but within 5 years | 610,207 | 429,902 |
After 5 years | 7,234,194 | 5,905,408 |
Total undiscounted lease payments | 10,034,402 | 8,050,740 |
Less: total future interest | (4,076,294) | (3,387,232) |
Present value of finance lease obligations | 5,958,108 | 4,663,508 |
Other financing obligations | ||
Within 1 year | 164,867 | 32,232 |
After 1 year but within 2 years | 233,151 | 37,462 |
After 2 years but within 3 years | 306,028 | 72,845 |
After 3 years but within 4 years | 291,552 | 69,248 |
After 4 years but within 5 years | 276,749 | 65,688 |
After 5 years | 647,305 | 163,480 |
Total undiscounted lease payments | 1,919,652 | 440,955 |
Less: total future interest | (497,689) | (121,742) |
Less: estimated construction costs | (47,924) | (9,127) |
Present value of other financing obligations | 1,374,039 | 310,086 |
Total of finance lease and other financing obligations | ||
Within 1 year | 710,324 | 534,493 |
After 1 year but within 2 years | 755,096 | 436,662 |
After 2 years but within 3 years | 859,501 | 472,688 |
After 3 years but within 4 years | 860,678 | 483,374 |
After 4 years but within 5 years | 886,956 | 495,590 |
After 5 years | 7,881,499 | 6,068,888 |
Total undiscounted lease payments | 11,954,054 | 8,491,695 |
Less: total future interest | (4,573,983) | (3,508,974) |
Less: estimated construction costs | (47,924) | (9,127) |
Present value of total of finance lease and other financing obligations | 7,332,147 | 4,973,594 |
Finance lease and other financing obligations, current | 230,746 | 222,473 |
Finance lease and other financing obligations, non-current | 7,101,401 | 4,751,121 |
Operating lease obligations | ||
Within 1 year | 140,967 | 97,993 |
After 1 year but within 2 years | 123,042 | 72,046 |
After 2 years but within 3 years | 101,640 | 64,151 |
After 3 years but within 4 years | 101,750 | 64,086 |
After 4 years but within 5 years | 105,115 | 64,547 |
After 5 years | 1,411,770 | 880,855 |
Total undiscounted lease payments | 1,984,284 | 1,243,678 |
Less: total future interest | (769,087) | (478,541) |
Operating Lease, Liability, Total | 1,215,197 | 765,137 |
Operating lease liabilities, current | 73,362 | 55,139 |
Operating lease liabilities, non-current | 1,141,835 | 709,998 |
Total | ||
Within 1 year | 851,291 | 632,486 |
After 1 year but within 2 years | 878,138 | 508,708 |
After 2 years but within 3 years | 961,141 | 536,839 |
After 3 years but within 4 years | 962,428 | 547,460 |
After 4 years but within 5 years | 992,071 | 560,137 |
After 5 years | 9,293,269 | 6,949,743 |
Total undiscounted lease payments | 13,938,338 | 9,735,373 |
Less: total future interest | (5,343,070) | (3,987,515) |
Less: estimated construction costs | (47,924) | (9,127) |
Present value of total obligations | 8,547,344 | 5,738,731 |
Including: | ||
Current Portion | 304,108 | 277,612 |
Non-current portion | 8,243,236 | ¥ 5,461,119 |
Other disclosures | ||
Total future lease payments for additional leases that have not yet commenced, primarily for data center buildings | ¥ 292,830 | |
Minimum | ||
Other disclosures | ||
Lease terms | 1 year | |
Maximum | ||
Other disclosures | ||
Lease terms | 20 years |
OTHER LONG-TERM LIABILITIES (De
OTHER LONG-TERM LIABILITIES (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Other long-term liabilities | ||
Consideration payable for acquisitions | ¥ 19,655 | ¥ 23,062 |
Payables for purchase of property and equipment | 185,310 | 231,459 |
Deferred revenue - non-current (Note 4) | 14,865 | 15,419 |
Deferred government grants | 6,196 | 6,507 |
Interest rate swap contracts (Note 15) | 10,408 | |
Asset retirement obligations | 62,719 | 52,441 |
Others | 9,589 | 6,241 |
Total other long-term liabilities | ¥ 298,334 | ¥ 345,537 |
REDEEMABLE PREFERRED SHARES - M
REDEEMABLE PREFERRED SHARES - Movement of redeemable preferred shares (Details) ¥ in Thousands, $ / shares in Thousands, $ in Thousands | Mar. 27, 2019USD ($)$ / sharesshares | Jun. 30, 2020CNY (¥) |
Movement of the redeemable preferred shares | ||
Balance at beginning of period | ¥ 1,061,981 | |
Balance at end of period | 1,064,137 | |
Redeemable preferred shares | ||
Movement of the redeemable preferred shares | ||
Balance at beginning of period | 1,061,981 | |
Accrual of redeemable preferred shares dividends | 26,667 | |
Settlement of redeemable preferred shares dividends | (40,068) | |
Foreign exchange impact | 15,557 | |
Balance at end of period | ¥ 1,064,137 | |
Redeemable preferred shares | PA Goldilocks Limited | ||
Movement of the redeemable preferred shares | ||
Issuance of ordinary shares (in shares) | shares | 150,000 | |
Share Price | $ / shares | $ 1 | |
Issuance of redeemable preferred shares | $ | $ 150,000 |
REDEEMABLE PREFERRED SHARES - K
REDEEMABLE PREFERRED SHARES - Key terms of the convertible preferred shares (Details) $ / shares in Units, $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($)D$ / shares | |
REDEEMABLE PREFERRED SHARES | |
Number of trading days | 20 |
Redeemable preferred shares | |
REDEEMABLE PREFERRED SHARES | |
Dividend rate per annum | 5.00% |
Increase dividend rate per annum | 7.00% |
Increase in dividend rate each quarter thereafter if the Company has not redeemed all of the preferred shares outstanding as of the eighth anniversary of the Issue Date | 0.50% |
Number of trading days | 20 |
Consecutive trading days | 30 |
Aggregate value of preferred shares | $ | $ 10,000 |
Minimum percentage of the preferred shares issued as of the Issue Date, right to require the Company to sell all or a portion of its business and/or to conduct other fundraising or refinancing activities | 90.00% |
Minimum votes required for certain actions (as a percent) | 75.00% |
Issuance costs | $ | $ 2,646 |
ADS | |
REDEEMABLE PREFERRED SHARES | |
Volume-weighted average price ("VWAP") per ADS | $ / shares | $ 53.40 |
Conversion price | $ / shares | $ 35.60 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS - Balance sheet location (Details) ¥ in Thousands, $ in Thousands | Jun. 30, 2020CNY (¥) | Jun. 30, 2020USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2019USD ($) |
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Interest rate swap contracts | ¥ 10,408 | |||
Interest rate swap contracts | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Derivative, Notional Amount | $ | $ 115,900 | $ 118,500 | ||
Interest rate swap contracts | Not designated as hedging instrument | Accrued expenses and other payables | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Interest rate swap contracts | ¥ 17,182 | 351 | ||
Interest rate swap contracts | Not designated as hedging instrument | Other long-term liabilities | ||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||
Interest rate swap contracts | ¥ 10,408 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS - Statement of operations location (Details) - Interest rate swap contracts - Not designated as hedging instrument - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
DERIVATIVE FINANCIAL INSTRUMENTS | ||
Interest rate swap contracts | ¥ (9,264) | ¥ (12,953) |
Interest expenses | ||
DERIVATIVE FINANCIAL INSTRUMENTS | ||
Realized loss | (6,180) | (12,575) |
Unrealized loss | ¥ (3,084) | ¥ (378) |
FAIR VALUE MEASUREMENT (Details
FAIR VALUE MEASUREMENT (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
FAIR VALUE MEASUREMENT | ||
Convertible bonds payable fair value | ¥ 3,408,248 | ¥ 2,448,646 |
Fair Value, Measurements, Recurring | ||
FAIR VALUE MEASUREMENT | ||
Liability measured at fair value | ¥ 17,182 | ¥ 10,759 |
ORDINARY SHARES (Details)
ORDINARY SHARES (Details) $ / shares in Units, ¥ in Thousands, $ in Thousands | Mar. 19, 2019CNY (¥)shares | Mar. 19, 2019USD ($)shares | Jun. 30, 2020CNY (¥)itemshares | Jun. 30, 2020USD ($)item$ / sharesshares | Jun. 30, 2020CNY (¥) | Jun. 30, 2019CNY (¥) | Dec. 31, 2019shares |
Ordinary shares | |||||||
Issuance of ordinary shares | ¥ | ¥ 3,533,285 | ¥ 2,982,242 | |||||
Proceeds from public offering, net of underwriting discounts and commissions and other issuance costs | ¥ 2,982,242 | $ 444,699 | |||||
Private Placement | |||||||
Ordinary shares | |||||||
Price per share (in USD/share) | $ / shares | $ 8.125 | ||||||
Proceeds from public offering, net of underwriting discounts and commissions and other issuance costs | ¥ 3,533,285 | $ 500,784 | |||||
Number of investors | item | 2 | 2 | |||||
ADS | |||||||
Ordinary shares | |||||||
Ordinary shares issued (in shares) | 13,731,343 | 13,731,343 | |||||
ADS | Over-Allotment Option | |||||||
Ordinary shares | |||||||
Ordinary shares issued (in shares) | 1,791,044 | 1,791,044 | |||||
ADS | Private Placement | |||||||
Ordinary shares | |||||||
Price per share (in USD/share) | $ / shares | $ 65 | ||||||
Class A | |||||||
Ordinary shares | |||||||
Ordinary shares issued (in shares) | 109,850,744 | 109,850,744 | |||||
Common stock, outstanding shares (in shares) | 1,210,996,227 | 1,148,842,379 | |||||
Class A | Over-Allotment Option | |||||||
Ordinary shares | |||||||
Ordinary shares issued (in shares) | 14,328,352 | 14,328,352 | |||||
Class A | Private Placement | |||||||
Ordinary shares | |||||||
Ordinary shares issued (in shares) | 62,153,848 | 62,153,848 | |||||
Class B | |||||||
Ordinary shares | |||||||
Common stock, outstanding shares (in shares) | 67,590,336 | 67,590,336 | |||||
Hillhouse | Class A | Private Placement | |||||||
Ordinary shares | |||||||
Issuance of ordinary shares | $ | $ 400,000 | ||||||
STT GDC | Class A | Private Placement | |||||||
Ordinary shares | |||||||
Issuance of ordinary shares | $ | $ 105,000 |
SHARE-BASED COMPENSATION - Plan
SHARE-BASED COMPENSATION - Plans and Grants (Details) - shares | 1 Months Ended | |
Aug. 31, 2016 | Jul. 31, 2014 | |
The 2014 Plan | ||
SHARE-BASED COMPENSATION | ||
Total number shares which may be issued | 29,240,000 | |
The 2016 Plan | ||
SHARE-BASED COMPENSATION | ||
Total number shares which may be issued | 56,707,560 | |
Authorized shares, maximum automatic approval (as a percent) | 3.00% | |
Authorized shares, automatic increment trigger (as a percent) | 1.50% |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock Option Activity (Details) - CNY (¥) ¥ / shares in Units, ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Number of options | ||
Outstanding, beginning (in shares) | 14,629,096 | |
Exercised (in shares) | (13,960,096) | |
Outstanding, ending (in shares) | 669,000 | |
Intrinsic value of options exercised | ¥ 615,542 | ¥ 204,449 |
Weighted average exercise price | ||
Outstanding, beginning (in RMB per share) | ¥ 5.4 | |
Exercised (in RMB per share) | 5.5 | |
Outstanding, ending (in RMB per share) | 5.5 | |
Weighted average grant-date fair value per option | ||
Outstanding, beginning (in RMB per share) | 1.7 | |
Exercised (in RMB per share) | 1.6 | |
Outstanding, ending (in RMB per share) | ¥ 2.9 | |
Options vested and expect to vest | ||
Number of options | 669,000 | |
Weighted average exercise price (in RMB per share) | ¥ 5.5 | |
Weighted average grant-date fair value per option (in RMB per share) | ¥ 2.9 | |
Stock options outstanding and stock options exercisable | ||
Number of shares | 669,000 | |
Weighted average remaining contractual life (years) | 9 months 18 days | |
Weighted average exercise price (in RMB per share) | ¥ 5.5 | |
Other disclosures | ||
Unvested employee or non-employee stock options (in shares) | 0 | 0 |
Aggregate intrinsic value of options outstanding and exercisable | ¥ 43,470 | ¥ 578,481 |
SHARE-BASED COMPENSATION - Sett
SHARE-BASED COMPENSATION - Settlement of Liability Classified Restricted Shares (Details) - CNY (¥) ¥ in Thousands | 3 Months Ended | 4 Months Ended | 6 Months Ended | |
May 31, 2019 | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | |
SHARE-BASED COMPENSATION | ||||
Settlement of liability-classified restricted share award | ¥ 4,675 | ¥ 3,627 | ||
Compensation expense | ¥ 133,842 | 62,934 | ||
Restricted shares | ||||
SHARE-BASED COMPENSATION | ||||
Settlement of liability-classified restricted shares award (in shares) | 100,136 | |||
Compensation expense | ¥ 133,842 | ¥ 62,795 | ||
Restricted shares | Directors | ||||
SHARE-BASED COMPENSATION | ||||
Settlement of liability-classified restricted shares award (in shares) | 121,568 | 100,136 | ||
Settlement of liability-classified restricted share award | ¥ 3,627 | ¥ 4,675 | ||
Compensation expense | ¥ 0 |
SHARE-BASED COMPENSATION - Rest
SHARE-BASED COMPENSATION - Restricted Stock Activity (Details) ¥ / shares in Units, ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020CNY (¥)¥ / sharesshares | Jun. 30, 2019CNY (¥) | |
Weighted average grant-date fair value per share (RMB) | ||
Total share based compensation expense | ¥ | ¥ 133,842 | ¥ 62,934 |
Restricted shares | ||
Number of Shares | ||
Outstanding, beginning | shares | 33,357,296 | |
Granted (in shares) | shares | 100,136 | |
Vested (in shares) | shares | (3,611,936) | |
Forfeited (in shares) | shares | (656,248) | |
Outstanding, end | shares | 29,189,248 | |
Weighted average grant-date fair value per share (RMB) | ||
Outstanding, beginning | ¥ / shares | ¥ 22.4 | |
Granted (in RMB per share) | ¥ / shares | 46.8 | |
Vested (in RMB per share) | ¥ / shares | 8 | |
Forfeited (in RMB per share) | ¥ / shares | 8.2 | |
Outstanding, end | ¥ / shares | ¥ 24.6 | |
Total unrecognized compensation expense | ¥ | ¥ 229,750 | |
Total share based compensation expense | ¥ | ¥ 133,842 | 62,795 |
Weighted average period over which unrecognized compensation expense is expected to be recognized | 1 year 6 months 7 days | |
Intrinsic value of restricted shares vested | ¥ | ¥ 182,254 | ¥ 74,940 |
Intrinsic value of unvested restricted shares | ¥ | ¥ 2,057,665 |
SHARE-BASED COMPENSATION - Expe
SHARE-BASED COMPENSATION - Expenses (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
SHARE-BASED COMPENSATION | ||
Compensation expense | ¥ 133,842 | ¥ 62,934 |
Cost of revenue | ||
SHARE-BASED COMPENSATION | ||
Compensation expense | 34,439 | 14,858 |
Selling and marketing expenses | ||
SHARE-BASED COMPENSATION | ||
Compensation expense | 26,124 | 14,697 |
General and administrative expenses | ||
SHARE-BASED COMPENSATION | ||
Compensation expense | 71,527 | 32,509 |
Research and development expenses | ||
SHARE-BASED COMPENSATION | ||
Compensation expense | ¥ 1,752 | ¥ 870 |
REVENUE (Details)
REVENUE (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue recognition | ||
Net revenue | ¥ 2,582,623 | ¥ 1,877,030 |
Service revenue | ||
Revenue recognition | ||
Net revenue | 2,567,064 | 1,876,040 |
Colocation services | ||
Revenue recognition | ||
Net revenue | 2,069,387 | 1,532,192 |
Managed service and others | ||
Revenue recognition | ||
Net revenue | 497,677 | 343,848 |
IT Equipment sales | ||
Revenue recognition | ||
Net revenue | ¥ 15,559 | ¥ 990 |
INCOME TAX (Details)
INCOME TAX (Details) $ in Millions | Jun. 30, 2020 | Jan. 01, 2018HKD ($)item | Jun. 30, 2020 | Jun. 30, 2019 |
INCOME TAX | ||||
Income tax rate (as a percent) | 25.00% | 25.00% | 25.00% | |
PRC | ||||
INCOME TAX | ||||
Income tax rate (as a percent) | 25.00% | |||
Hong Kong SAR | ||||
INCOME TAX | ||||
Income tax rate (as a percent) | 16.50% | 16.50% | ||
Amount of first assessable profits earned will be taxed at half the current tax rate | $ | $ 2 | |||
Tax rate for first HK$2 million of assessable profits earned | 8.25% | |||
Number of entities to be nominated and benefit from the progressive rates | item | 1 | |||
Singapore | ||||
INCOME TAX | ||||
Income tax rate (as a percent) | 17.00% |
INCOME TAX - By tax Jurisdictio
INCOME TAX - By tax Jurisdictions (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Loss (income) before income taxes: | ||
PRC | ¥ (46,466) | ¥ 59,174 |
Other jurisdictions | 197,457 | 157,788 |
Total loss before income taxes | 150,991 | 216,962 |
Current tax expenses: | ||
PRC | 102,351 | 33,669 |
Total current tax expenses | 102,351 | 33,669 |
Deferred tax benefits: | ||
PRC | (60,264) | (20,852) |
Total deferred tax benefits | (60,264) | (20,852) |
Total income tax expenses | ¥ 42,087 | ¥ 12,817 |
INCOME TAX - Reconciliation of
INCOME TAX - Reconciliation of statutory tax rate and effective tax rate (Details) | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 |
Reconciliation of the differences between actual income tax expense and the PRC statutory tax rate | |||
PRC enterprise income tax rate | 25.00% | 25.00% | 25.00% |
Non-PRC resident enterprises not subject to income tax | (43.40%) | (16.80%) | |
Tax differential for entities in non-PRC jurisdiction | (2.50%) | (1.30%) | |
Preferential tax rate | (0.80%) | 0.00% | |
Tax effect of current period permanent differences | 3.30% | 0.00% | |
Non-taxable income | 9.10% | 0.00% | |
Change in valuation allowance | (23.40%) | (17.00%) | |
Return to provision adjustment | 4.80% | 4.20% | |
Effective tax rate (as a percent) | (27.90%) | (5.90%) |
INCOME TAX - Deferred tax asset
INCOME TAX - Deferred tax assets and liabilities (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||||
Allowance for accounts receivable | ¥ 104 | ¥ 12 | ||
Government subsidy | 1,592 | 3,127 | ||
Accrued expenses | 35,741 | 27,601 | ||
Asset retirement obligation | 15,680 | 13,110 | ||
Leases | 13,457 | |||
Net operating loss carry forwards | 322,473 | 267,159 | ||
Total gross deferred tax assets | 389,047 | 311,009 | ||
Valuation allowance on deferred tax assets | (246,750) | (205,976) | ¥ (192,994) | ¥ (155,852) |
Deferred tax assets, net of valuation allowance | 142,297 | 105,033 | ||
Deferred tax liabilities: | ||||
Property and equipment | (148,284) | (171,656) | ||
Intangible assets | (137,878) | (97,102) | ||
Prepaid land use rights | (1,592) | (1,612) | ||
Leases | (9,568) | |||
Accounts receivable | (4,836) | |||
Total deferred tax liabilities | (287,754) | (284,774) | ||
Net deferred tax liabilities | (145,457) | (179,741) | ||
Analysis as: | ||||
Deferred tax assets | 136,809 | 72,931 | ||
Deferred tax liabilities | (282,266) | (252,672) | ||
Net deferred tax liabilities | ¥ (145,457) | ¥ (179,741) |
INCOME TAX - Movement of the va
INCOME TAX - Movement of the valuation allowance (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Movement of the valuation allowance | ||
Balance at the beginning of the period | ¥ 205,976 | ¥ 155,852 |
Increase during the period | 40,774 | 37,142 |
Balance at the end of the period | ¥ 246,750 | ¥ 192,994 |
INCOME TAX - Net operating loss
INCOME TAX - Net operating losses (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Operating losses carry forwards | |||||
Deferred tax assets | ¥ 136,809 | ¥ 136,809 | ¥ 72,931 | ||
Valuation allowance on deferred tax assets | 246,750 | 246,750 | ¥ 192,994 | ¥ 205,976 | ¥ 155,852 |
Deferred tax assets for net operating losses | 316,985 | 316,985 | |||
Valuation allowance on net operating loss carryforwards | ¥ 207,304 | ¥ 207,304 | |||
PRC enterprise income tax rate | 25.00% | 25.00% | 25.00% | ||
State administration of taxation, China | |||||
Operating losses carry forwards | |||||
Net operating losses carry forwards | ¥ 1,175,104 | ¥ 1,175,104 | |||
Net operating losses carry forwards expire if unused by December 31, 2020 | 28,534 | 28,534 | |||
Net operating losses carry forwards expire if unused by December 31, 2021 | 42,796 | 42,796 | |||
Net operating losses carry forwards expire if unused by December 31, 2022 | 95,686 | 95,686 | |||
Net operating losses carry forwards expire if unused by December 31, 2023 | 290,251 | 290,251 | |||
Net operating losses carry forwards expire if unused by December 31, 2024 | 350,896 | 350,896 | |||
Net operating losses carry forwards expire if unused by December 31, 2025 | ¥ 366,941 | ¥ 366,941 | |||
Withholding tax for dividends distributed by a PRC-resident enterprise to its non-PRC-resident corporate investor (as a percent) | 10.00% |
DISTRIBUTION OF PROFIT (Details
DISTRIBUTION OF PROFIT (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Percentage of after-tax profits required to be appropriated to general reserve fund | 10.00% | |
General reserve as a percentage of registered capital up to which after-tax profit of PRC subsidiaries and VIEs could discontinue allocations to the general reserve fund | 50.00% | |
Aggregate amounts of capital and statutory reserves restricted | ¥ 8,437,718 | ¥ 7,367,536 |
Amount of non-distributable general reserve fund | ¥ 15,712 | ¥ 15,712 |
LOSS PER ORDINARY SHARE - Compu
LOSS PER ORDINARY SHARE - Computation of basic and diluted loss per share (Details) - CNY (¥) ¥ / shares in Units, ¥ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Computation of basic and diluted loss per share | |||
Net loss | ¥ (193,078) | ¥ (229,779) | |
Change in redemption value of redeemable preferred shares | (17,760) | ||
Cumulative dividend on redeemable preferred shares | (26,667) | (13,472) | |
Net loss attributable to ordinary shareholders | ¥ (219,745) | ¥ (261,011) | |
Weighted average number of ordinary shares outstanding-basic and diluted | 1,186,168,652 | 1,070,590,091 | |
Loss per ordinary share - basic and diluted | ¥ (0.19) | ¥ (0.24) | |
Proceeds from this public offering, net of underwriting discounts and commissions and other issuance costs | ¥ 3,560,004 | ¥ 2,982,242 | |
Ordinary Shares | |||
Computation of basic and diluted loss per share | |||
Shares issued to depository bank (in shares) | 48,962,896 | ||
Proceeds from this public offering, net of underwriting discounts and commissions and other issuance costs | ¥ 0 |
LOSS PER ORDINARY SHARE - Exclu
LOSS PER ORDINARY SHARE - Excluded from the computation of diluted loss per share (Details) - shares | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Antidilutive securities excluded from computation of earnings per share | ||
Total | 76,385,848 | 89,661,856 |
Share options/restricted shares | ||
Antidilutive securities excluded from computation of earnings per share | ||
Total | 29,858,248 | 43,134,256 |
Convertible bonds payable | ||
Antidilutive securities excluded from computation of earnings per share | ||
Total | 46,527,600 | 46,527,600 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020CNY (¥)segment | Dec. 31, 2019CNY (¥) | |
Number of operating segments | segment | 1 | |
Hong Kong SAR | ||
Long-lived assets | ¥ | ¥ 1,740,765 | ¥ 1,605,892 |
MAJOR CUSTOMERS (Details)
MAJOR CUSTOMERS (Details) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020CNY (¥)customer | Jun. 30, 2019CNY (¥) | |
Revenue | ||
Revenue | ¥ 2,582,623 | ¥ 1,877,030 |
Revenues | Customer concentration | ||
Revenue | ||
Number of contracting customers generated over 10% of the Company's total revenues | customer | 3 | |
Revenues | Customer concentration | Customer A | ||
Revenue | ||
Revenue | ¥ 670,730 | |
Revenues | Customer concentration | Customer B | ||
Revenue | ||
Revenue | 416,396 | |
Revenues | Customer concentration | Customer C | ||
Revenue | ||
Revenue | ¥ 270,071 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Capital commitments (Details) - CNY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Jun. 30, 2020 | |
Litigation contingencies | ||
Accrued legal cost and other related costs in a consolidated class action lawsuit | ¥ 5,748 | |
Capital additional purchase commitments | ||
Capital commitments | ||
Capital commitments outstanding not provided for in the financial statements, Contracted for | 2,722,084 | ¥ 3,343,911 |
Purchase of land use rights | ||
Capital commitments | ||
Capital commitments outstanding not provided for in the financial statements, Contracted for | ¥ 4,500 | ¥ 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Related Party Transactions | ||
Commission income | ¥ 490 | |
Amount due to related parties | 21,388 | ¥ 11,988 |
STT Singapore DC Pte. Ltd. | ||
Related Party Transactions | ||
Commission income | 246 | |
Amount due to related parties | 10,195 | 5,350 |
Billed on behalf of related parties | 17,237 | |
STT DEFU 2 Pte. Ltd. | ||
Related Party Transactions | ||
Commission income | 244 | |
Amount due to related parties | 11,193 | ¥ 6,638 |
Billed on behalf of related parties | ¥ 19,655 |
PARENT ONLY FINANCIAL INFORMA_3
PARENT ONLY FINANCIAL INFORMATION - Condensed Balance Sheets (Details) - CNY (¥) ¥ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||||
Cash | ¥ 7,742,082 | ¥ 5,810,938 | ||
Prepaid expenses | 104,357 | 80,913 | ||
Other current assets | 155,782 | 148,603 | ||
Total current assets | 9,618,087 | 7,084,709 | ||
Restricted cash | 171,705 | 128,025 | ||
Other non-current assets | 385,643 | 289,410 | ||
Total assets | 41,608,850 | 31,492,531 | ||
Current liabilities | ||||
Accounts payable | 2,880,745 | 1,675,966 | ||
Accrued expenses and other payables | 1,541,688 | 817,883 | ||
Total current liabilities | 6,468,154 | 3,999,514 | ||
Long-term borrowings | 9,337,882 | 8,028,473 | ||
Convertible bonds payable | 2,086,179 | 2,049,654 | ||
Other long-term liabilities | 298,334 | 345,537 | ||
Total liabilities | 26,716,051 | 20,136,969 | ||
Redeemable preferred shares (US$0.00005 par value; 150,000 shares authorized, issued and outstanding as of December 31, 2019 and June 30, 2020; Redemption value of RMB1,061,981 and RMB1,064,137 as of December 31, 2019 and June 30, 2020, respectively; Liquidation value of RMB1,537,636 and RMB2,378,419 as of December 31, 2019 and June 30, 2020, respectively) | 1,064,137 | 1,061,981 | ||
Shareholders' Equity | ||||
Ordinary shares (US$0.00005 par value; 2,002,000,000 shares authorized; 1,148,842,379 and 1,210,996,227 Class A ordinary shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively; 67,590,336 Class B ordinary shares issued and outstanding as of December 31, 2019 and June 30, 2020) | 434 | 412 | ||
Additional paid-in capital | 16,125,571 | 12,403,043 | ||
Accumulated other comprehensive loss | (47,075) | (52,684) | ||
Accumulated deficit | (2,250,268) | (2,057,190) | ||
Total shareholders' equity | 13,828,662 | 10,293,581 | ¥ 8,419,255 | ¥ 5,521,925 |
Commitments and contingencies | ||||
Total liabilities, redeemable preferred shares and shareholders' equity | 41,608,850 | 31,492,531 | ||
Parent Company | Reportable Legal Entities | ||||
Current assets | ||||
Cash | 4,280,909 | 2,560,388 | ||
Prepaid expenses | 3,987 | 7,048 | ||
Other current assets | 16,688 | 21,537 | ||
Total current assets | 4,301,584 | 2,588,973 | ||
Restricted cash | 27,636 | 27,225 | ||
Investment and loans to subsidiaries | 13,436,889 | 11,539,590 | ||
Other non-current assets | 4,542 | 4,954 | ||
Total assets | 17,770,651 | 14,160,742 | ||
Current liabilities | ||||
Accounts payable | 695 | 7,168 | ||
Accrued expenses and other payables | 93,290 | 49,546 | ||
Due to subsidiaries | 942 | 928 | ||
Total current liabilities | 94,927 | 57,642 | ||
Long-term borrowings | 686,730 | 681,235 | ||
Convertible bonds payable | 2,086,179 | 2,049,654 | ||
Other long-term liabilities | 10,016 | 16,649 | ||
Total liabilities | 2,877,852 | 2,805,180 | ||
Redeemable preferred shares (US$0.00005 par value; 150,000 shares authorized, issued and outstanding as of December 31, 2019 and June 30, 2020; Redemption value of RMB1,061,981 and RMB1,064,137 as of December 31, 2019 and June 30, 2020, respectively; Liquidation value of RMB1,537,636 and RMB2,378,419 as of December 31, 2019 and June 30, 2020, respectively) | 1,064,137 | 1,061,981 | ||
Shareholders' Equity | ||||
Ordinary shares (US$0.00005 par value; 2,002,000,000 shares authorized; 1,148,842,379 and 1,210,996,227 Class A ordinary shares issued and outstanding as of December 31, 2019 and June 30, 2020, respectively; 67,590,336 Class B ordinary shares issued and outstanding as of December 31, 2019 and June 30, 2020) | 434 | 412 | ||
Additional paid-in capital | 16,125,571 | 12,403,043 | ||
Accumulated other comprehensive loss | (47,075) | (52,684) | ||
Accumulated deficit | (2,250,268) | (2,057,190) | ||
Total shareholders' equity | 13,828,662 | 10,293,581 | ||
Commitments and contingencies | ||||
Total liabilities, redeemable preferred shares and shareholders' equity | ¥ 17,770,651 | ¥ 14,160,742 |
PARENT ONLY FINANCIAL INFORMA_4
PARENT ONLY FINANCIAL INFORMATION - Condensed Balance Sheets (Parenthetical) (Details) ¥ in Thousands | Jun. 30, 2020$ / shares | Jun. 30, 2020CNY (¥)shares | Dec. 31, 2019$ / shares | Dec. 31, 2019CNY (¥)shares |
Ordinary shares | ||||
Ordinary shares, par value (in dollars per share) | $ / shares | $ 0.00005 | $ 0.00005 | ||
Ordinary shares, shares authorized | 2,002,000,000 | 2,002,000,000 | ||
Redeemable preferred shares | ||||
Redeemable preferred shares | ||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | 0.00005 | 0.00005 | ||
Preferred Stock, Shares Authorized | 150,000 | 150,000 | ||
Preferred Stock, Shares Issued | 150,000 | 150,000 | ||
Preferred Stock, Shares Outstanding | 150,000 | 150,000 | ||
Redemption value | ¥ | ¥ 1,064,137 | ¥ 1,061,981 | ||
Liquidation value | ¥ | ¥ 2,378,419 | ¥ 1,537,636 | ||
Class A | ||||
Ordinary shares | ||||
Ordinary shares, shares issued | 1,210,996,227 | 1,148,842,379 | ||
Ordinary shares, shares outstanding | 1,210,996,227 | 1,148,842,379 | ||
Class B | ||||
Ordinary shares | ||||
Ordinary shares, shares issued | 67,590,336 | 67,590,336 | ||
Ordinary shares, shares outstanding | 67,590,336 | 67,590,336 | ||
Reportable Legal Entities | Redeemable preferred shares | ||||
Redeemable preferred shares | ||||
Preferred Stock, Shares Issued | 150,000 | 150,000 | ||
Parent Company | Reportable Legal Entities | ||||
Ordinary shares | ||||
Ordinary shares, par value (in dollars per share) | $ / shares | 0.00005 | 0.00005 | ||
Ordinary shares, shares authorized | 2,002,000,000 | 2,002,000,000 | ||
Parent Company | Reportable Legal Entities | Redeemable preferred shares | ||||
Redeemable preferred shares | ||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.00005 | $ 0.00005 | ||
Preferred Stock, Shares Authorized | 150,000 | 150,000 | ||
Redemption value | ¥ | ¥ 1,064,137 | ¥ 1,061,981 | ||
Liquidation value | ¥ | ¥ 2,378,419 | ¥ 1,537,636 | ||
Parent Company | Reportable Legal Entities | Class A | ||||
Ordinary shares | ||||
Ordinary shares, shares issued | 1,210,996,227 | 1,148,842,379 | ||
Ordinary shares, shares outstanding | 1,210,996,227 | 1,148,842,379 | ||
Parent Company | Reportable Legal Entities | Class B | ||||
Ordinary shares | ||||
Ordinary shares, shares issued | 67,590,336 | 67,590,336 | ||
Ordinary shares, shares outstanding | 67,590,336 | 67,590,336 |
PARENT ONLY FINANCIAL INFORMA_5
PARENT ONLY FINANCIAL INFORMATION - Condensed Statements of Operations (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Condensed Statements of Operations | ||
Net revenue | ¥ 2,582,623 | ¥ 1,877,030 |
Cost of revenue | (1,871,183) | (1,403,252) |
Gross loss | 711,440 | 473,778 |
Operating expenses | ||
Selling and marketing expenses | (60,060) | (57,637) |
General and administrative expenses | (273,722) | (185,003) |
Research and development expenses | (18,987) | (8,839) |
Income from operations | 358,671 | 222,299 |
Other income (expenses): | ||
Interest income | 7,781 | 25,668 |
Interest expenses | (569,295) | (466,691) |
Others, net | 1,326 | 3,325 |
Loss before income taxes | (150,991) | (216,962) |
Income tax benefits (expenses) | (42,087) | (12,817) |
Net loss | (193,078) | (229,779) |
Parent Company | Reportable Legal Entities | ||
Condensed Statements of Operations | ||
Net revenue | 0 | 0 |
Cost of revenue | (36,659) | (17,414) |
Gross loss | (36,659) | (17,414) |
Operating expenses | ||
Selling and marketing expenses | (25,662) | (15,301) |
General and administrative expenses | (94,191) | (66,492) |
Research and development expenses | (1,752) | (870) |
Income from operations | (158,264) | (100,077) |
Other income (expenses): | ||
Interest income | 2,837 | 23,490 |
Interest expenses | (65,283) | (68,340) |
Equity in loss of subsidiaries | 28,796 | (84,852) |
Others, net | (1,164) | 0 |
Loss before income taxes | (193,078) | (229,779) |
Income tax benefits (expenses) | 0 | 0 |
Net loss | ¥ (193,078) | ¥ (229,779) |
PARENT ONLY FINANCIAL INFORMA_6
PARENT ONLY FINANCIAL INFORMATION - Condensed Statements of Comprehensive Loss (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Condensed Statements of Comprehensive Loss | ||
Net loss | ¥ (193,078) | ¥ (229,779) |
Other comprehensive income | ||
Foreign currency translation adjustments, net of nil tax | 5,609 | 66,872 |
Comprehensive loss | (187,469) | (162,907) |
Parent Company | Reportable Legal Entities | ||
Condensed Statements of Comprehensive Loss | ||
Net loss | (193,078) | (229,779) |
Other comprehensive income | ||
Foreign currency translation adjustments, net of nil tax | 5,609 | 66,872 |
Comprehensive loss | ¥ (187,469) | ¥ (162,907) |
PARENT ONLY FINANCIAL INFORMA_7
PARENT ONLY FINANCIAL INFORMATION - Condensed Statements of Comprehensive Loss (Parenthetical) (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Condensed Statements of Comprehensive Loss | ||
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 |
Parent Company | Reportable Legal Entities | ||
Condensed Statements of Comprehensive Loss | ||
Foreign currency translation adjustments, tax | ¥ 0 | ¥ 0 |
PARENT ONLY FINANCIAL INFORMA_8
PARENT ONLY FINANCIAL INFORMATION - Condensed Statements of Cash Flows (Details) - CNY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Operating activities: | |||
Net cash used in operating activities | ¥ 16,238 | ¥ 56,104 | |
Investing activities: | |||
Net cash used in investing activities | (3,884,836) | (1,373,593) | |
Financing activities: | |||
Proceeds from long-term borrowings | 2,702,543 | 2,741,183 | |
Payment of issuance cost of borrowings | (55,677) | (119,832) | |
Proceeds from exercise of stock options | 77,415 | 43,508 | |
Net proceeds from issuance of ordinary shares | 3,560,004 | 2,982,242 | |
Net proceeds from issuance of redeemable preferred shares | 989,349 | ||
Payment of redeemable preferred shares dividends | (40,068) | (11,458) | |
Net cash provided by financing activities | 5,872,392 | 4,769,377 | |
Effect of exchange rate changes on cash and restricted cash | 49,487 | 113,320 | |
Net increase in cash and restricted cash | 2,053,281 | 3,565,208 | |
Cash and restricted cash at beginning of period | 5,973,262 | 2,284,748 | ¥ 2,284,748 |
Cash and restricted cash at end of period | 8,026,543 | 5,849,956 | 5,973,262 |
Supplemental disclosures of cash flow information | |||
Interest paid | 488,256 | 383,423 | |
Supplemental disclosures of non-cash investing and financing activities | |||
Settlement of liability-classified restricted share award | 4,675 | 3,627 | |
Parent Company | Reportable Legal Entities | |||
Operating activities: | |||
Net cash used in operating activities | (60,886) | (39,268) | |
Investing activities: | |||
Increase of due from subsidiaries | (1,843,512) | (1,506,159) | |
Net cash used in investing activities | (1,843,512) | (1,506,159) | |
Financing activities: | |||
Proceeds from long-term borrowings | 268,100 | ||
Payment of issuance cost of borrowings | (10,619) | ||
Proceeds from exercise of stock options | 77,415 | 43,508 | |
Net proceeds from issuance of ordinary shares | 3,560,004 | 2,982,242 | |
Net proceeds from issuance of redeemable preferred shares | 989,349 | ||
Payment of redeemable preferred shares dividends | (40,068) | (11,458) | |
Net cash provided by financing activities | 3,586,732 | 4,271,741 | |
Effect of exchange rate changes on cash and restricted cash | 38,598 | 84,356 | |
Net increase in cash and restricted cash | 1,720,932 | 2,810,670 | |
Cash and restricted cash at beginning of period | 2,587,613 | 817,488 | 817,488 |
Cash and restricted cash at end of period | 4,308,545 | 3,628,158 | ¥ 2,587,613 |
Supplemental disclosures of cash flow information | |||
Interest paid | 45,692 | 41,006 | |
Supplemental disclosures of non-cash investing and financing activities | |||
Settlement of liability-classified restricted share award | ¥ 4,675 | ¥ 3,627 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Events ¥ in Thousands | 4 Months Ended | ||
Oct. 19, 2020CNY (¥)subsidiary | Sep. 22, 2020 | Jul. 31, 2020 | |
Various facility agreements with third-party banks | |||
SUBSEQUENT EVENTS | |||
Number of subsidiaries that obtained credit facility agreements | subsidiary | 6 | ||
Financing credit facilities | ¥ | ¥ 4,662,000 | ||
LandCo. | LicenseCo. | |||
SUBSEQUENT EVENTS | |||
Equity interest acquired (as a percent) | 88.00% | ||
Remaining equity interest to be acquired (as a percent) | 12.00% | ||
BJ13 | LicenseCo. | |||
SUBSEQUENT EVENTS | |||
Equity interest acquired (as a percent) | 82.00% | ||
Remaining equity interest to be acquired (as a percent) | 18.00% | ||
BJ13 | CPE Fund | |||
SUBSEQUENT EVENTS | |||
Remaining equity interest to be acquired (as a percent) | 42.00% | ||
BJ14 | |||
SUBSEQUENT EVENTS | |||
Equity interest acquired (as a percent) | 100.00% | ||
BJ13 | |||
SUBSEQUENT EVENTS | |||
Controlling interest owned (as a percent) | 58.00% | ||
BJ13 | CPE Fund | |||
SUBSEQUENT EVENTS | |||
Interest owned (as a percent) | 42.00% |